The Central Bank of Nigeria (CBN) is looking at launching the pilot phase of the eNaira, joining the league of nations who are adopting technology as part of monetary policy with the introduction of Central Bank Digital Currency (CBDC).
CBDC’s are new variants of Central Bank money that are different from physical cash and reserves/settlement accounts. Although it is based on the same technology with cryptoassets such as Bitcoin, Ethereum and the likes, CBDCs are totally different as they are a digital representation of sovereign currency issued by a jurisdiction’s monetary authority and a direct liability of the Central Bank that issued it.
When the eNaira is launched in October, Nigeria will join the three countries, the Bahamas, Eastern Caribbean and China who have begun the use of CBDCs. While Canada, South Africa, Japan, Ecuador, Sweden, Singapore and Hong Kong are already at advanced stage.
The United States, Great Britain, Jamaica, United Arab Emirates as well as Mexico are still at the research stage.
According to the CBN director of information technology, Rakiya Mohammed, the apex bank may conduct a proof of concept before the end of this year with project name tagged ‘GIANT’. It will use the Hyperledger Fabric blockchain.
The Hyperledger Fabric is an open source project that acts as a foundation for developing blockchain-based products, solutions, and applications using plug-and-play components that are aimed for use within private enterprises.
The founder of Blockchain Mobile Technologies, Mr Stanley Okwu, believes digital currency would make it easier to transfer remittances into the country and would lead to creation of jobs and allow new ways for digital services.
Financial technology expert, and chief executive of eMaginatons Limited, Sola Fanawopo, commenting on the eNaira noted that asides from strengthening the identity system in the country, a CBDC will help address the issues of cybersecurity, improve literacy level in the country, reduce the cost of transaction thereby enabling increased confidence in the system.
Chief Executive Officer of Gboza Gbosa Technology Limited, Ade Atobatele says CBDC can be a tool to help CBN control the M2 money supply.
Meanwhile, the CBN is looking up to the eNaira to help achieve macroeconomic management & growth, cross border trade facilitation, financial inclusion, monetary policy effectiveness, improved payments efficiency, revenue and tax collection, remittances improvement as well as targeted social interventions.
Mohammed notes, “Our target for this year was to achieve 80 per cent of financial inclusion and we are at about 60 per cent now and at the rate that we are going we are not likely to meet this target.”
She however adds that the CBDC will accelerate the ability to meet this target.