A survey of the continent’s central banks reveals optimism about greater efficiency and inclusion, but a number of drawbacks remain; BIS report: uneven progress, differing motivations in African CBDC adoption Nigeria already has a retail CBDC that is working.
According to a Bank for International Settlements (BIS) report that was released on November 24, mobile money has been a strong competitor to central bank digital currency (CBDC) in Africa. However, many central bankers on the continent have greater faith in CBDC. According to the BIS, central bankers in Africa also saw CBDC as more useful for implementing monetary policy than bankers in other parts of the world.
The survey that provided the basis for the report received responses from 19 African central banks, all of which expressed an active interest in CBDC. Only Nigeria has issued a public-use retail CBDC, the eNaira, while Ghana is piloting a retail CBDC project and South Africa is currently working on a wholesale CBDC project.
For 48% of respondents, the provision of cash was listed by African central bankers as one of the primary reasons for the implementation of a CBDC. They asserted that the printing, transportation, and storage of banknotes and coins would be reduced by a CBDC. All respondents mentioned financial inclusion. In 2021, only half of the adult African population was banked.
More than half of all users and two-thirds of all global money transfers are made in Sub-Saharan Africa. According to the report, CBDC’s entry into this industry could boost competition and cut costs. “Support new digital technologies and their integration with the broader economy” is what a CBDC would do.
The process of issuing and managing a CBDC is difficult:
“Here, African central banks draw attention to features that are very similar to those of other EMEs [emerging market economies]:resilience of the network, the cost, availability, and combinability of technologies, as well as the scalability and functionality of those technologies. The functional expense of such an intricate framework is high.”
Several of the central bankers were concerned about cybersecurity as well as the possibility of low adoption. Although bankers anticipated that CBDCs would assist in the implementation of monetary policy, bank disintermediation also ranked among the concerns. Design was heavily concerned with the expense of remittances.