CBDC in Africa: What to Expect

CBDC in Africa: what to expect as the continent moves towards mass implementation of central bank digital tokens 

As we seen historically, Africa currencies are highly volatile, new technologies have been slowly entering the continent’s financial industry, triggering discussions regarding the impacts of tech novelties in the territory. Recently, debates over the applicability of central bank digital currencies (CBDC) in the continent have been surging and catching the public’s attention. The possibility of having this technology working and connecting transactions throughout Africa represents a solid step towards the evolution of payment systems in the region, but the effectiveness of this model still depends on many aspects that are foreseen by specialists. 

The success of CBDC adoption in each African nation also depends on the structure of each countries’ payment systems and how mature their mobile technology is to receive such innovation. African economies suffer the consequences of constant currency devaluation, which makes citizens eager for potential solutions that help them survive the wave of challenges that affect the continent’s financial market.  Evidently, these scenarios vary in different countries, but the overall context is filled with economic and currency instability and doubts from the mass population that arises as a result of this unpredictability. 

Source: https://news.bitcoin.com/ghana-cbdc-development-new-central-bank-document-outlines-key-motivations-for-issuing-the-digital-currency/

CBDCs recently became a suitable alternative to counteract these issues. Many federal authorities have bet on this technology to give their population something to hold on to. Although the adoption of CBDCs in the African market is still in its embryonic stage, it created a sense of excitement that many Africans have been longing for. Nigerians were the first to experience the innovation, sparking a series of discussions centered on digital currencies and the changes they can trigger and promote in Africa. CBDCs indeed promise a lot and can be a groundbreaking change for Africans to deal with payments and continent-wide transactions. However, federal governments need to acknowledge the challenges they need to overcome to guarantee the successful implementation of this technology in their economies.

The mass adoption of CBDC is highly dependable on each country’s ability to regulate the use of this technology within their territories. As digital money is increasingly being used for transactions inside the African continent and international negotiations, customers are inclined to look for interoperable solutions to administer their finances. However, many of these tools and platforms are still unregulated nowadays, which makes them risky and fragile. The platforms that will sustain CBDC implementation in Africa have to guarantee cross-border transfer between countries without adding any extra barriers to economic exchanges between African nations. The way to establish a channel that can reduce the cost and time of transactions without entering a new scope of complexity, accessibility, and privacy is indeed very long.

Source: https://tcrn.ch/3iHMKyX

Massive CBDC adoption will also put in check the intermediary role played by local banks, which will directly affect credit and loan offers. This happens because if clients are not moving and articulating their money inside their bank of trust and decide to concentrate assets using CBDCs, banks cannot collect financial data that allow them to offer certain products. Moreover, digital money improvements always shed light on issues with cyberattacks and fake businesses that manage to survive online, where it is easier to attract naïve customers looking for quick solutions. 

Particularly in Africa, there is also the need to look at internet access and the percentage of citizens that still cannot afford a smartphone or stable internet connectivity. Less than 50% of Africa’s population have a mobile phone, and less than 30% have access to mobile connection. If federal governments cannot work first to strengthen the Internet penetration rate within their territories, CBDCs won’t really bring many improvements, and the effects of its novelties will not be that visible. 

Just like cryptocurrencies, CBDCs are also digital tokens stored in a blockchain network. However, the CBDCs are stored in a centralized network, which requires some extra attention to guarantee their functionality and reliability. The advancements of the digital revolution era are unpredictable, but the transformations that this period of time is imposing in global finance and currencies are right in front of us. According to a report issued by BIS (Bank for International Settlements) issued in October 2021, over 80% of the countries in the world were already shaping economic initiatives around the potential of CBCDs by that time. The first countries in Africa to actively use this new digital currency format were South Africa and Nigeria, but other nations such as Egypt, Morocco, and Kenya started early their research on the feasibility of this technology. 

Source: https://www.cnbcafrica.com/2022/are-central-bank-digital-currencies-the-key-to-unlocking-financial-inclusion-in-africa/

  If combined with other plans of action to accelerate the maturation of Africa’s financial system, such as improved tax regulation and increased cross-border trading, CBDCs can fill many gaps, especially in a region that deals with over 90 million unbanked citizens. Instead of relying on the traditional use of bank accounts that disrupt the journey towards a modernized financial system, CBDCs will allow central banks to offer new, simple products for citizens to organize their finances and give these institutions a shortcut to better understand money flow demands. With this type of knowledge, banks can widen the scope of their business model and target new customer groups, especially those looking for loans and lower interest rates. 

Analyzing the potential of CBDCs from a wider perspective, federal African authorities can also rely on this technology to stimulate citizens on a daily regimen, since all the transactions and negotiations can happen via a smartphone and an e-wallet. The possibility of concentrating financial assets and businesses online also help reduce the number of wrong or irregular transfers, improving security and money exchange efficiency.

CBDCs promise to solve daily inconveniences that most African citizens have to deal with to organize their financial lives. For instance, traditional bank bureaucracy makes transactions extremely time-consuming. Since many banks in Africa did not follow up with the modern changes brought by innovative technology, many local citizens lost trust in these institutions, not to mention the charges and fees that were never adjusted to follow the setbacks faced by some developing African economies. These issues make it even more urgent to promote financial inclusion in Africa, and that’s why CBDCs have the potential to be a game-changer in the continent.

Dov Marcus


A passionate Crypto investor since 2012, with deep understanding of marketing and business development, over the past few decades Dov Marcus has built many successful multi-million businesses as an entrepreneur and as an investor.