How Can Central Bank Digital Currencies Facilitate Trade and Investment in Africa?

This paper examines how central bank digital currencies (CBDCs) present transformative trade and investment opportunities for Africa. They provide significant benefits to improve cross-border payments and boost trade and investment, including reduced transaction costs, faster transactions, improved transparency and traceability, and enhanced financial inclusion. CBDCs can streamline foreign exchange processes by enabling direct conversion of one digital currency into other digital currencies or even support multi-currency interoperability. The paper also identifies the challenges and risks associated with CBDCs, including limited technological infrastructure, cybersecurity threats, privacy concerns, limited interoperability and standardisation, regulatory uncertainty, reliance on government-backed digital currencies, scalability and performance, and dependence on external systems. Policy recommendations aim to maximise the opportunities that CBDCs offer while addressing Africa-specific challenges. Journal of Contemporary Issues in African Trade and Trade Finance, 10(1), 64-79