AFRICA'S CBDC FUTURE!
CBDCs and the digital yuan are coming.
TWO fabulous papers on how CBDCs will be a true game-changer for Africa!
First, an article by an old friend, Dr. Lauren Johnston, on how China’s Digital yuan will be a new force for digital finance throughout Africa.
Many African nations are engaging with China through the Belt and Road Initiative (BRI) and those that develop CBDC will eventually engage in CBDC trade with China.
Then, in support of Lauren’s assertions, here is a SECOND great read by the IMF: 23 of 30 sub-Saharan African nations surveyed are exploring CBDCs to foster financial insulation, improve domestic payments, and enhance cross-border transfers.
Africa’s CBDC future won’t be without bumps in the road, but it’s coming.
👉TAKEAWAYS
🔹 The IMF surveyed 20 sub-Saharan nations and found that 23 of 30 were exploring CBDCs.
🔹 Nigeria had Africa’s first CBDC and the world’s second; however, its launch was troubled and has since been redesigned.
🔹CBDCs are in pilot phases in Ghana, Kenya, and South Africa.
🔹 Financial inclusion and efficiency in domestic payments are the most dominant motivations for CBDC adoption, followed by cross-border transfers.
🔹 Africa currently has about 42 currencies! The correspondent banks used for transfers are located outside Africa and typically settle in USD!
🔹 China is Africa’s most important trade partner and bilateral creditor and many nations are “Belt and Road Initiative” (BRI) partners.
🔹 China is clear about its intentions: At the 10-year anniversary forum of the BRI, held in Beijing in October 2023, Xi promised that China would hold a digital economy expo and build pilot e-commerce zones in BRI signatory countries.
🔹 Where the e-CNY helps in the internationalization of the RMB, the impact and implications for Africa, are likely to be considerable.
🔹 The e-CNY may expand China’s role in the international financial system.
🔹 Fast payment systems and e-Money (such as mobile money) are considered as quick wins in sub-Saharan Africa and compete with CBDCs.
👊STRAIGHT TALK👊
CBDCs are coming to Africa, and their ability to foster financial inclusion and domestic and, eventually, international transfers will be a game changer.
Or, if you believe the nay-sayers, they won’t. Many point to Nigeria’s ill-fated eNaira CBDC launch and claim that this fate will befall other nations.
So, which will it be? South Africa is not a slouch, and as a BRICS nation, it already is piloting a digital Rand, and writing them off would seem a significant error.
Equally advanced is Ghana, which learned from Nigeria’s mistakes and is designing its eCedi with offline capabilities at launch. Ghana is aiming for optimal inclusion and correcting Nigeria’s errors.
How will African CBDCs interact with the e-CNY?
South Africa is an observing member of the BIS’s mBridge CBDC transfer project in Hong Kong and will likely be able to trial e-CNY transfers in about two years.
South Africa’s CBDC transfers will be the test case for e-CNY use in Africa, and if it demonstrates actual cost savings, I would expect other nations to follow.
So, are you betting that Africa will fail with CBDC?
I wouldn’t.
Thoughts?
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