Zambia is reported to be among a growing number of African governments to take its monetary system digital through a central bank digital currency (CBDC).This has the potential to make it easier to do business with the country.CBDCs differ from cryptocurrencies in that they are developed by the central bank and are linked to the official exchange rate of the country’s currency.In its explanation of CBDCs, the South African Reserve Bank states that the advantages of a digital currency are that it “unlocks potential benefits related to usability for consumers and merchants, safety and security, and traceability of transactions without infringing on privacy rights. “CBDC payments and remittances can be made remotely, which is harder to do with cash.”Zambia’s interest in CBDCs was reported by Bloomberg after the Bank of Zambia (BoZ) issued a warning that cryptocurrencies were illegal in the country.In October 2021, Nigeria became the first African country to issue a CBDC, the eNaira.Ghana is reported to be ready to test the e-Cedi, and Kenya has embarked on a public participation process. South Africa is also exploring the introduction of a CBDC, according to the Reserve Bank.Other countries in the region researching CBDCs are Namibia, Zimbabwe, Madagascar, Tanzania, Rwanda and Uganda, according to an International Monetary Fund blog by Habtamu Fuje, Saad Quayyum and Franck Ouattara.They believe that the CBDCs could help bring down the costs of importing and exporting.“Sub-Saharan Africa is the most expensive region to send and receive money, with an average cost of just under 8% 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,” they state.
