## More African Central Banks Are Exploring Digital Currencies

_IMF Blog, June 24, 2022_

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**Canonical URL:** [More African Central Banks Are Exploring Digital Currencies](https://www.imf.org/en/blogs/articles/2022/06/23/blog-africa-cbdc)

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## Bibliographic details
- Authors: Habtamu Fuje, Saad Quayyum, Franck Ouattara
- Published: June 24, 2022

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### Overview and recent developments
- Authors: Habtamu Fuje, Saad Quayyum, Franck Ouattara
- Date: June 24, 2022
- Several sub-Saharan African central banks are exploring or in the pilot phase of a digital currency, following Nigeria’s October introduction of e-Naira.
- Nigeria was the second country after the Bahamas to roll out a CBDC.
- CBDCs are digital versions of cash that are more secure and less volatile than crypto assets because they are issued and regulated by central banks.

### Country examples and pilot types
- South Africa
  - The South African Reserve Bank is experimenting with a wholesale CBDC, which can only be used by financial institutions for interbank transfers, as part of the second phase of its Project Khokha.
  - South Africa is participating in a cross-border pilot with the central banks of Australia, Malaysia and Singapore.
- Ghana
  - The Bank of Ghana is testing a general purpose or retail CBDC, the e-Cedi, which can be used by anyone with either a digital wallet app or a contactless smart card that can be used offline.
- Other countries in the region are in the research phase.

### Potential benefits for the region
- Promoting financial inclusion
  - CBDCs could bring financial services to people who previously didn’t have bank accounts, especially if designed for offline use.
  - In remote areas without internet access, digital transactions can be made at little or no cost using simple feature phones.
- Distribution of targeted welfare payments
  - CBDCs can be used to distribute targeted welfare payments, especially during sudden crises such as a pandemic or natural disaster.
- Facilitating cross-border transfers and payments
  - Sub-Saharan Africa is the most expensive region to send and receive money, with an average cost of just under 8 percent of the transfer amount.
  - CBDCs could make sending remittances easier, faster, and cheaper by shortening payment chains and creating more competition among service providers.
  - Faster clearance of cross-border payments would help boost trade within the region and with the rest of the world.

### Risks and challenges
- Digital infrastructure
  - Governments will need to improve access to digital infrastructure such as a phone or internet connectivity.
  - While the region has made significant strides, more investment is needed.
- Data privacy and cyber risk
  - Central banks will need to develop the expertise and technical capacity to manage the risks to data privacy, including from potential cyber-attacks.
- Financial integrity and identification
  - Managing financial integrity will require countries to strengthen their national identification systems so know-your-customer requirements are more easily enforced.
- Financial stability and bank funding
  - There is a risk that citizens pull too much money out of banks to purchase CBDCs, affecting banks’ ability to lend.
  - This is especially a problem for countries with unstable financial systems.
- Impact on private digital payment industry
  - Central banks will need to consider how CBDCs affect the private industry for digital payment services, which has made important strides in promoting financial inclusion through mobile money.

### Policy implications and considerations
- Invest in digital infrastructure to enable widespread CBDC use, including offline-capable solutions for feature phones.
- Build central bank technical capacity for cybersecurity, data privacy management, and CBDC operations.
- Strengthen national identification systems to facilitate KYC and financial integrity.
- Design CBDC features and frameworks to mitigate risks to bank funding and lending, especially in countries with unstable financial systems.
- Assess and coordinate with the private digital payments sector to preserve gains in financial inclusion and competition.

*IMF Blog: More African Central Banks Are Exploring Digital Currencies (June 24, 2022)*

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## References

- [Chart of the Week](https://www.imf.org/en/News/Chart-of-the-week)
- [https://www.imf.org/wp-content/uploads/2022/06/COTW-AFR-Digital-Currencies.jpg](https://www.imf.org/wp-content/uploads/2022/06/COTW-AFR-Digital-Currencies.jpg)
- [Regional Economic Outlook](https://www.imf.org/en/Publications/REO/SSA/Issues/2022/04/28/regional-economic-outlook-for-sub-saharan-africa-april-2022)

_Source: https://www.imf.org/en/blogs/articles/2022/06/23/blog-africa-cbdc_