The Central Bank of Nigeria (CBN) has announced the formal engagement of the global Fintech company, Bitt Inc., as the Technical Partner for its digital currency, named eNaira, which is due to be unveiled later in in October this year.
This development was disclosed in Abuja by the governor of the Central Bank, Mr. Godwin Emefiele, who listed the benefits of the Central Bank Digital Currency (CBDC) to include increased cross-border trade, accelerated financial inclusion, cheaper and faster remittance inflows, easier targeted social interventions, as well as improvements in monetary policy effectiveness, payment systems efficiency, and tax collection.
Project Giant, as the Nigerian CBDC pilot is known, has been a long and thorough process for the CBN, with the Bank’s decision to digitize the Naira in 2017, following extensive research and explorations. Given the significant explosion in the use of digital payments and the rise in the digital economy, the CBN’s decision follows an unmistakable global trend in which over 85 percent of Central Banks are now considering adopting digital currencies in their countries.
The CBN’s selection of Bitt Inc, from among highly competitive bidders, was hinged on the company’s technological competence, efficiency, platform security, interoperability, and implementation experience.
In choosing Bitt Inc, the CBN will rely on the company’s tested and proven digital currency experience, which is already in circulation in several Eastern Caribbean Countries. Bitt Inc. was key to the development and successful launch of the central bank digital currency (CBDC) pilot of the Eastern Caribbean Central Bank (ECCB) in April 2021.
Financial technology experts have commended the Central Bank of Nigeria on the guidelines released ahead of the launch of the eNaira, saying there is need to step up the identity management as well as cyber security of the scheme.
Managing director of Sofunix Communications and Investment Limited, Mr Sola Oni said that “Digital currency has become a global means of exchange. The currency is similar to some fundamental attributes of money.
“However, digital currency has some unique characteristics. But the currency requires strong regulation by the Central Bank to protect users. For instance, digital currency has no intrinsic value. It can be affected by cost and illiquidity.”
Oni said that there is a challenge of double spend whereby the currency spent on one product cannot be spend on another.
He noted that digital currency thrives in an environment where there is regular Internet, saying this may pose a problem in Nigeria at the moment. The effect on the Capital Market depends on how it affects investors’ adjustment to the new currency.
Speaking on the guidelines released by the CBN over the weekend, chief executive of eMaginatons Limited, Sola Fanawopo, said most of the issues that need to be addressed have been captured as he commended the CBN for being able to come up with it something quite comprehensive within a short period.
According to him, the duties of banks as well as other financial institutions as intermediaries in the system have been established as the CBN can only act as banker to the government. He noted that with the eNaira, it will be easier for banks as well as the government to track spending as a way of increasing credit particularly for small and micro businesses.
“The eNaira will help SMEs because their transactions can now be tracked. Unlike now where lost of their transactions are physical, with the eNaira, transactions become digital and traceable. If banks cannot trace how businesses spend the monies that they lend them, how then can tey give them credit. But with this, banks will know how the money is being spent and they will be able to give even more credit.
“However, there is need to build a strong identity system because a digital currency needs a strong identity management system. Also, fraud will move from physical to digital because thieves will always follow the money.
“We must build a strong cyber security system and i hope this will make banks invest more in protecting customers from fraud. Right now banks are not liable when there is fraud on an account which is not the case in other climes.
If banks are made liable for fraud, they will do their best make sure that customers monies are not stolen. They will deploy all necessary means against phishing, and all sorts of cyber crimes in the industry. With the eNaira, I believe that more should be done to protect the customers so as to increase their confidence in the system.”
Fanawopo also noted that the eNaira will serve as a veritable tool for the government to monitor financing of terrorism in the country as he said “there will be no hiding space for anybody and the government will be able to trace proceeds of crime and monies used to sponsor terrorism in the country.”