Namibia is exploring the potential launch of its central bank digital currency (CBDC) as a means to enhance cross-border payments and promote financial inclusion within the country. The Bank of Namibia (BoN) is currently in the preliminary stages of assessing whether a CBDC could effectively address the payment challenges faced by the nation. This exploration follows a recent technical assistance mission from the International Monetary Fund (IMF), which provided insights into the feasibility of such an initiative.
However, the IMF remains cautious about the implementation of a CBDC in Namibia. While it supports the BoN’s research efforts, the IMF has advised against a hasty rollout of a digital currency. Instead, it recommends that Namibia prioritize improvements to its existing payment infrastructure before delving into the complexities associated with a digital currency. The IMF also argues that a retail CBDC (CBDC) may not necessarily enhance financial inclusion in the manner that Namibia envisions.
Despite these reservations, the BoN is actively pursuing discussions with central banks in neighboring countries, including Eswatini, Lesotho, and South Africa, to explore the potential for a CBDC to facilitate smoother cross-border payments. The bank has indicated that it is taking the IMF’s recommendations seriously and is using them to refine its strategy before making any definitive decisions regarding the implementation of a CBDC.
The concept of a digital Namibian dollar was first introduced in 2022 when the BoN released a consultative paper on CBDCs. Since then, progress has been slow, with ongoing discussions focused on potential use cases in collaboration with neighboring central banks. This cautious approach is prudent, especially in light of the challenges faced by other African nations in their CBDC endeavors.
For instance, Nigeria launched its eNaira in 2021, but the initiative has not achieved the desired success. Similarly, Zimbabwe attempted a different strategy in 2023 by introducing a gold-backed digital currency to combat the rapid devaluation of its local currency. Meanwhile, Ghana has been developing its eCedi for several years, yet it has not yet rolled out the currency despite successful pilot programs.
As Namibia contemplates the future of its CBDC, the question remains whether it will fully commit to this digital currency initiative or heed the IMF’s advice to focus on strengthening its existing financial systems first. For the time being, the BoN is adopting a cautious stance, carefully evaluating its options and potential impacts before making any significant decisions regarding the implementation of a CBDC.
