Ghana’s digital agenda is being propelled by many drivers including the move by the Bank of Ghana (BoG) to explore the Central Bank Digital Currency (CBDC) as a strategic tool for a progressive and digitally inclusive society and therefore have developed the eCedi, which is currently in its pilot stage for a later nationwide launch as a means of meeting the strategic goals of the central Bank.

The central Bank aims to use the eCedi as a means to facilitate financial inclusion, pursue a cash lite economy, enhance operational efficiency, cost effectiveness in payments, and provide a safe, secure and trustworthy alternative to privately issued digital currencies, thereby addressing the risk of unregulated privately issued digital “currencies” or virtual assets.

Ghana’s payment system has gone through phases, ranging from the Ghana interbank settlement, Cheque code line clearing, the Ghana Automated Clearing House – which enables the use of direct credit, direct debit, Ezwich, Gh-link TM, GhiPSS instant pay, and the recent Mobile Money services. Hence, the introduction of the eCedi is seen as another trajectory in the financial innovative journey.

The recent COVID Pandemic inspired the use of Mobile Money (MoMo) accounts as the main and convenient means for financial transactions. This, according to the Global Findex Database, increased MoMo account ownership by 21%, from 39 % to 60%, boosting overall account ownership by 11%. It is interesting to note that Sub Saharan Africa is considered as the region in which mobile money account ownership is most widespread.

Domestic remittances are important part of the economy in many places around the world. In Developing economies, 33% of adults send or receive domestic remittances to or from a relative or friend living elsewhere in the country. In Sub-Saharan Africa, domestic remittances are particularly important because it is the means by which 53 % of adults send or receive payments. It is unsurprising to know that Ghana has the highest share of adults involved in domestic remittances at 77% , whiles Cameroon, Gabon, Kenya, Namibia, Senegal, and Uganda are in the 60–70% range.

Aside using Mobile Money as a means for transactions, its usage expands to include saving money or storing money, and also allowing account owners to borrow money. However, a larger share of account holders store money than to borrow money through this means.  

The Central Bank of Ghana claims to be aware of the existing consumer habits in the country; stating that, most people in Ghana are already used to paying with cashless mediums and therefore they envisage that switching to the eCedi, would be quite simple.

The eCedi will be under the full control of The Bank of Ghana (BoG), the only entity with the mandate to create and destroy digital cash. Aside being the issuers of the eCedi, they will define policies that will cover wallets, transaction limits, monitoring and regulatory compliance, and sanctions for breaches for the participants in the financial ecosystem.

Also, Financial institutions will be responsible for the monitoring of the eCedi payment transactions and shall report all suspicious transactions to the Financial Intelligence Center (FIC).

In the area of accessibility, the BoG is confident that absence of mobile data networks in the rural areas of Ghana should not serve as a barrier to the use of the eCedi. In other words, the eCedi should work effectively in both online and offline environments because there will be the hosted wallets option, managed by financial institutions, and the hardware wallets, which are secure portable storage devices held by individuals. The hosted wallets require access to the internet, while the hardware wallets work in offline mode.

E- levy threatens interest in digital transactions

The BoG looks forward to the issuing of the digital currency with great optimism, but there is still the issue of the recent public reaction to digital transactions due to the imposition of the E-levy tax. The responses have been highly opposing and consumer reactions have been highly elastic with many choosing to withdraw to the use of cash, and others finding ways to evade the payment of the tax. Digital transaction values and volumes have been on the decline since the introduction of the digital tax policy in May 2021. These reactions could threaten the success and general acceptability of the Central Bank Digital Currency- eCedi.

According to Imani Ghana’s digital financial service report -June 2022, 83% or 8 in ten of their 1,677 respondents indicated that their volume of transactions has changed since the implementation of the e-levy in May 2022.

It is crucial to note that the success of the eCedi is entirely dependent on the acceptability by the general public and therefore must not pose any extra financial burden or complexity to the user. Thankfully, the Bank of Ghana assures the public that similar to cash, the eCedi is meant to be free of charge for consumers.

Ready to go cashless?

It is also key to note that there are other challenges or barriers that the unbanked Ghanaian adults raise as reasons for them not owning either traditional or mobile accounts; like affordability and access to mobile phones, proximity to financial institutions, complex documentation requirements, and the low level of financial literacy among many Ghanaians. There is the need for a lot of public education to get the entire populace acquainted with the use of the national digital currency, and to also eliminate doubts, fears and concerns, since the eCedi will serve a retail purpose for the entire population, unlike Nigeria’s e-Naira or that of South Africa’s Pilot CBDC, which is for wholesale purpose, and hence, limited to transactions among financial institutions.

It may however be vital to view the eCedi as a complementary payment to other payment methods but not as a means to abolish or replace cash and other private digital currencies.

Safety and security 

There are no doubts that private digital currencies like the Cryptocurrencies, etc. could be a channel for unlawful financial issues and therefore the Central Bank could minimize these risks by offering are liable and regulated alternative to cryptocurrencies.

This therefore increases the financial burden on BoG to be well prepared with the needed Infrastructure investments to ensure effective monitoring and security. As a currency, trust is critical to its adoption, therefore it must meet very high security requirements. Protecting the privacy of users is very crucial because the public will entrust into the central bank large amount of personal transaction data and need to be confident that this information will be safe and not misused.