Mobile money has been a strong competitor to central bank digital currency (CBDC) in Africa, but many of the continent’s central bankers have more confidence in CBDC, according to a report by the Bank for International Settlements (BIS). published November 24. African central bankers also saw CBDCs as more useful for conducting monetary policy than bankers in other parts of the world, according to the BIS.
Nineteen African central banks responded to the survey that served as the basis for the report, and all said they were actively interested in CBDCs. Nigeria only issued a retail CBDCeNaira, intended for public use, while Ghana has a retail CBDC project in the pilot phase and South Africa is currently running a wholesale CBDC project that is intended for institutional use.
A new survey of 19 African central banks shows that the main concerns regarding #CBDC is cyber security, even more so than anywhere else. The heavy operational burden of the central bank is also a bigger problem than in other regions https://t.co/FzkCq5POOD pic.twitter.com/XqYHjRwyRv
— Bank for International Settlements (@BIS_org) November 24, 2022
Providing cash was cited by African central bankers as the main motivation for implementing CBDCs for 48% of respondents. According to them, CBDC would save money on printing, transporting and storing notes and coins. Financial inclusion was mentioned by all respondents. In 2021, less than half of Africa’s adult population was covered.
Sub-Saharan Africa accounts for two-thirds of the world’s remittances by volume and more than half of all users. Write CBDC in this field could improve competition and lower costs, the report said. A CBDC would “promote new digital technologies and their integration with the wider economy”.
Issuing and operating a CBDC is a challenging task:
“African central banks here highlight aspects very similar to other EMEs [emerging market economies …]: network resilience, price, availability and combinability of technologies and their scalability and functionality. The operating costs of such a complex system are high.”
This was combined with cyber security concerns and the risk of low adoption in the minds of several central bankers. Bank intermediation was also among the concerns, although bankers expected CBDCs to help implement monetary policy. The cost of transfers was a major issue for the design.