Governor of the Bank of Ghana (BoG), Dr. Ernest Addison, has clarified that Ghana’s version of the Central Bank Digital Currency (CBDC), the eCedi, will not encounter similar challenges facing the eNaira launched by the Central Bank of Nigeria last year.
The Governor said Nigeria’s version of the CBDC is central bank-based instead of retail-based and as such, excluded commercial banks from the chain of distribution.
“The Nigerians chose to have eNaira, which is central bank-based rather than retail-based and therefore their commercial banks are not part of the distribution network. This is where the basic problem is. Ghana is not using that approach. We are having a retail-based CBDC which would take advantage of the existing distribution frameworks, similar to the way we work with the paper money and therefore we do not expect to have that problem in Ghana”.
Dr. Ernest Addison
According to the IMF, the eNaira may reduce demand for deposits in commercial banks. This is because the eNaira is expected to be effectively seen as deposit with the Central Bank of Nigeria, resulting in funds transfer from accounts into this wallet that was being created.
Nigeria was the first country in Africa to officially launch the digital version of its currency, the eNaira, in October 2021. The eNaira is expected to increase the country’s gross domestic product by $29 billion over the next 10 years.
Dr. Addison was therefore, making clarifications as the Bank of Ghana is also piloting its CBDC which is expected to be launched soon and the measures his outfit is putting in place to address such a situation in case it rears its ugly head in Ghana.
The design of the eCedi
Ghana’s version of the CBDC, eCedi, will be under the full control of the Bank of Ghana which is the only entity eligible to create and destroy digital cash. However, the ecosystem of the eCedi will include key players such as banks and payment service providers, to provide access to end consumers.
Service providers such as banks, SDIs and PSPs are expected to facilitate interaction between the central bank and end consumers. According to the Bank of Ghana, this approach will encourage adoption through user-focused value-added services, accessibility and innovation on the back of the eCedi.
Currently in its pilot phase, the Bank of Ghana issued a new Design Paper on the digital Cedi which gives an overview of the motivations of issuing the eCedi, the potential benefits for stakeholders, the design principles of the eCedi including the governance, accessibility, interoperability, requisite infrastructure and security.
The move to introduce the digital currency aims at facilitating financial inclusion, pursuit of a cash-lite economy, enhancing operational efficiency and cost-effectiveness in payments, and provision of a safe, secure and trustworthy alternative to privately issued digital currencies.
The success of the eCedi is crucially dependent on public acceptance which means, it has to be accessible to everybody, usable for payments in all sorts of situations and everywhere. This means a person can pay with the eCedi in a retail shop, but also use it for online shopping or sending money to another individual.
The eCedi is designed for two types of wallets namely: hosted wallets managed by financial institutions and hardware wallets, which are secure portable storage devices held by individuals. According to the Bank of Ghana, hosted wallets require access to the internet while hardware wallets work in an offline mode.
Meanwhile, Vodafone Ghana’s mobile money platform, Vodafone Cash, has been selected by the Bank of Ghana among several entities to pilot the eCedi.
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