African countries took numerous initiatives to spur development and economic inclusion. In this series of innovations, African countries took rigorous measures for the digital transformation of the economic system in African countries.
The continent is striking hard to reap the benefits of digital technologies to spur development and economic inclusion particularly in the financial sector and in the payment systems. These digital transformations are not only transforming international trade and the financial sector but they are also transforming the nature of money and its use by the masses. One notable digital transformation of money is the evolution of digital currencies.
Recently The Bank of Nigeria published a paper, surveying the adoption of Central Bank Digital Currency (CBDC) by African countries. The researchers used secondary data to conduct the survey. Secondary data were collected from official media announcements about CBDCs and from online media sources and research publications about central bank digital currency.
The analysis highlighted that 70 per cent of African countries have not shown interest in CBDCs. The West African region has the highest number of countries that have not shown any interest in central bank digital currency. Only 4 African countries have a robust payment system infrastructure to support the system.
Further, Only 14 African countries have officially declared interest in central bank digital currency. Only 13 African countries have announced that they are studying CBDC to determine whether they will pursue CBDC as a short-term or long-term goal. Only 4 African countries have reached the pilot test stage of issuing a CBDC. Finally, only one African country has formally issued a CBDC.
The policy implication of the findings underscored that there is low interest in CBDC in the African continent. The low interest in central bank digital currency in Africa is attributed to many factors such as the strong preference for cash payments, lack of a robust payment system, low use of digital payments, central banks’ focus on other priorities, fear of failure, lack of government interest in digital currency and concerns about CBDC privacy risk and security threats.
Thus it was found that these factors can cause impediments to the development and economic inclusion in African countries. There is a need to accelerate the issuance of CBDC in African countries. Also, African countries that have already issued a CBDC and those in the pilot test stage need to pay attention to the specific design of CBDC and ensure that the CBDC design has features that mitigate international shocks and spillovers as well as features that permit greater financial inclusion for unbanked adults, and features that promote the better conduct of monetary policy.
It is important to note that there is significant penetration of digital assets in the continent. Also, African countries are taking critical steps for the development of the digital ecosystem. According to the African Blockchain report, blockchain funding in Africa raised a total of $474 million in 2022 from $90 million in 2021 highlighting a 429% year-on-year increase from 2021 to 2022. Thus a well-established legal system with foolproof implementation will strengthen the digital ecosystem penetration.