By David Mwanje
At the Annual Meeting on Banking Supervision and Financial Policy Implementation held at Lake Victoria Serena on September 24, 2025, Prof. Augustus Nuwagaba, Deputy Governor of the Bank of Uganda, delivered a compelling call to action for African central banks to integrate artificial intelligence (AI) into their operations. Speaking to deputy governors, resource persons from the Macroeconomic and Financial Management Institute of Eastern and Southern Africa (MEFMI), the Financial Stability Institute (FSI) of the Bank for International Settlements (BIS), and other regional central bank representatives, Nuwagaba highlighted AI’s transformative potential for the financial sector while cautioning against its inherent risks.
In his closing remarks, Nuwagaba emphasized that AI is revolutionizing financial operations across Africa, driven by the rapid rise of digital finance, mobile money, and FinTech innovations. He noted that AI tools are already enhancing credit scoring, customer service through chatbots, and risk management processes like fraud detection, anti-money laundering (AML), and countering the financing of terrorism (CFT). For central banks, AI offers improved operational efficiency, advanced data analytics, and the ability to process high-frequency, granular data for better regulatory oversight. “As regulators, we must embrace AI to support the delivery of our mandates,” Nuwagaba urged, underscoring its role in strengthening banking supervision and financial policy implementation.
However, Nuwagaba was quick to address the challenges. AI adoption increases interconnectedness, third-party dependencies, and cybersecurity threats, potentially impacting financial stability. Other risks include governance issues, data quality concerns, energy costs, and geopolitical challenges related to data center hosting. He stressed the need for sound risk management and a gradual approach to ensure stability during this transition. “The opportunities are high, but so are the risks,” he warned, advocating for a cautious yet progressive integration of AI.
Nuwagaba outlined key policy recommendations to harness AI’s potential. He called for African central banks to develop clear AI strategies aligned with broader digitalization policies, focusing on banking supervision, financial stability, monetary policy, payment systems, and reserve management. Strategic investments in human resources, infrastructure, and cybersecurity are critical, he noted, alongside fostering regional collaboration to share knowledge and build supervisory capacity. He also emphasized supporting local innovation to enhance sovereignty and boosting digital financial literacy to increase financial inclusion.
The Deputy Governor’s remarks come at a pivotal moment as African economies transition toward digital finance. With mobile money and FinTech driving financial inclusion, AI offers a chance to leapfrog legacy systems, but Nuwagaba cautioned that vulnerabilities like data privacy and model risks must be addressed. He advocated for investments in local infrastructure to mitigate geopolitical risks and ensure data sovereignty, a growing concern in the region.
Expressing gratitude to MEFMI and FSI for organizing the meeting, Nuwagaba reiterated the importance of continued collaboration among central banks. “This transition is our new normal,” he declared, urging regulators to embrace AI’s benefits while minimizing risks to ensure sustained financial stability. His speech underscored the consensus reached over the two-day meeting: AI integration is not just an option but a necessity for modern financial supervision.
As African central banks navigate this AI-driven era, Nuwagaba’s call to action sets the stage for a transformative approach to banking supervision, balancing innovation with stability to shape the future of the continent’s financial sector.
