Namibia Considers Launching CBDC Amidst Telecom Sector Growth

Namibia is evaluating the possibility of launching a Central Bank Digital Currency (CBDC) to enhance cross-border payments and financial inclusion. The Bank of Namibia is under advisement from the International Monetary Fund, which has cautioned against a rapid adoption. The telecom sector is witnessing substantial growth in data revenue, prompting infrastructure expansions to meet increasing demand.

Namibia is considering the launch of its Central Bank Digital Currency (CBDC) to improve cross-border payments and enhance financial inclusion. The Bank of Namibia (BoN) is in the preliminary stages of assessing whether a CBDC could address the country’s existing payment challenges. This exploration follows recent technical assistance from the International Monetary Fund (IMF), which, while supportive of BoN’s research, cautions against a hasty full rollout due to local infrastructure issues.

The IMF suggests that Namibia should prioritize enhancing its current payment systems before venturing into the complexities associated with a digital currency. It warns that a retail CBDC (rCBDC) might not achieve the desired improvements in financial inclusion. Nevertheless, BoN continues to engage in discussions with central banks in Eswatini, Lesotho, and South Africa regarding potential cross-border payment solutions, taking IMF recommendations into account as they refine their strategy.

The BoN originally proposed the concept of a digital Namibian dollar in 2022 through a consultative paper. Since then, progress has been slow, primarily limited to ongoing conversations with neighboring central banks about use cases. This cautious strategy seems prudent, given the difficulties faced by other African nations in implementing CBDCs, such as Nigeria’s eNaira and Zimbabwe’s gold-backed currency.

Simultaneously, Namibia’s telecom sector has experienced notable growth, generating over N$800 million ($43 million) in data revenue in the third quarter of 2024. This shift marks a transition from traditional voice service revenue dominance to the current data-centric model, fueled by affordable data plans and increased smartphone usage. Notably, data revenue now constitutes seventy percent of total mobile service earnings, a significant rise from forty-six percent in 2018.

To accommodate the growing demand for data services, telecom companies in Namibia are investing in infrastructure upgrades. Telecom Namibia is enhancing its 4G capabilities nationwide while exploring 5G deployment in urban areas. Government initiatives, including the National Broadband Policy, aim to promote competition and extend internet access, especially in rural regions where connectivity remains limited.

Despite these advancements, challenges such as cybersecurity concerns persist, prompting the government to draft new legislation to protect user data. The increased internet connectivity is expected to yield economic benefits, including job creation and improved access to vital services. Nebuchadnezzar’s focus on infrastructure, competition, and the resolution of existing challenges could position the country as a significant digital player in Africa.

In summary, Namibia is exploring the introduction of a Central Bank Digital Currency to enhance payment systems while cautiously considering IMF recommendations. As its telecom sector experiences significant revenue growth from data, ongoing infrastructure improvements are enacting essential changes for the future. The country’s dedication to balancing digital advancements with financial inclusion efforts signals its ambition to become a regional digital leader.

Original Source: techpoint.africa