Despite being one of the largest and most populated continents, Africa has a reputation for coming late whenever technological breakthroughs come to other continents. These breakthroughs tend to form mainstays in other continents and build proper markets there before coming to Africa.
However, some countries on the continent seem to be working hard not to let the crypto revolution pass them by. The next stop is a Central Bank Digital Currency.
The past few weeks have seen a lot of CBDC development across the world. However, the most impressive fact now is that several African countries have committed to building these assets as well. Last May, South Africa, the continent’s second-largest economy, confirmed that studies towards a CBDC are now set to begin.
South Africa Comes Out Swinging
According to a statement, the South Africa Reserve Bank (SARB) confirmed that it had begun preliminary feasibility studies into the “desirability and appropriateness” of a retail CBDC. The announcement included a definition of a CBDC by the SARB, with the agency explaining that it is looking to create a cash-complimentary sovereign digital currency that will be used to facilitate electronic payments.
As the SARB explained, the feasibility study aims to consider the effects of a general-purpose CBDC on its policy positions. The study will focus on some of the potential issues concerning a potential CBDC development in South Africa.
“The feasibility study will include practical experimentation across different emerging technology platforms, taking into account a variety of factors, including policy, regulatory, security and risk management implications.”
The feasibility study is expected to last until next year, with the SARB collecting all critical information along the way.
Ghana Looks to Beat Everyone to the Punch
Moving into June, Ghana’s government also confirmed that it was looking into CBDC development. Speaking during a news conference in Accra, Ernest Addison, the Governor of the Bank of Ghana, revealed that they were already in the advanced stages of developing their country’s CBDC.
Ghana has been working on CBDC development since 2019. At the time, Addison had told banking industry players that the Bank of Ghana would create a testing environment for the e-cedi with the hope of capturing the growing digital financial trend.
In his recent statement, Addison explained that the e-cedi will pass through evaluation and developmental processes before the Bank of Ghana decides how to go about a national rollout. Addison added that the final stage will involve a pilot program that aims to finalize all feasibility issues before the asset can be circulated across the country.
As for the progress so far, Addison pointed out that phase one was complete, with a team already on standby to handle the second phase. The government aims to conduct a limited rollout of the asset, with a focus on how it will work for digital and mobile payments in the country.
Ghana is looking to pioneer CBDC development in Africa, and it is expected that the e-cedi’s pilot will begin sometime this year.
Nigeria Moving Ahead Despite Regulatory Problems
Not one to lag behind its contemporaries, Nigeria has also committed to CBDC development. The continent’s largest economy is in the midst of a digital gold rush, although government policies threaten to hamper this movement. Regardless, a CBDC is now in the works.
Rakiya Mohammed, an information technology specialist at the Central Bank of Nigeria, told a local news source that the bank is indeed making efforts to develop a CBDC in the country. Speaking at a Bankers’ Committee meeting held in the country’s capital of Abuja, Mohammed said:
“Before the end of the year, the Central Bank will be making a special announcement and possibly launching a pilot scheme in order to be able to provide this kind of currency to the populace.”
In May, the Central Bank’s Governor, Godwin Emefiele, said that digital currencies will “come to life” in Nigeria. However, it is difficult to see that happening, especially after the same institution banned commercial banks in the country from interacting with crypto.
In a stunning move earlier this year, the Central Bank directed all commercial banks in Nigeria to cease serving crypto companies and customers. This means that bank transfer purchases that had anything to do with crypto would be flagged, and the accounts will most likely be frozen.
At the same time, digital banking platforms in Nigeria would be unable to provide accounts to their customers serving crypto anymore. In a single weekend, the Central Bank almost decimated its crypto industry. To this day, exchanges and their customers rely on peer-to-peer transfer and payment systems to buy and sell.
Except the Nigerian government plans to overhaul this ban, it is unclear how they expect a CBDC to be successful in the country. There is also the problem of crippling infrastructural challenges in Nigeria, making it almost impossible to get the CBDC to some of the most rural communities.
All of these developments serve as good news. Nigeria, South Africa, and Ghana are three of the largest economies in Africa. Success with a CBDC could inspire other countries to take up the challenge and try something new for once. While none of this guarantees success, it does mean that Africa is gearing up for a digital financial transformation.