Central Bank of Nigeria set to launch Digital Currency 1st October

By Ibidunni Banjoko

The Central Bank of Nigeria is taking the giant lead to be the first Apex bank in Sub-Sahara Africa to launch digital currency, on the 1st of October 2021.

The move is following the trend of Central banks around the world to develop their own digital currencies, which use technology to represent a country’s official currency in digital form.

This was said at the Committee of e-Business Industry Heads (CeBIH), Nigeria third quarter hybrid event, themed: Digital Currency and the Prospects of CBDC in Nigeria.

Speaking on the drivers of Central Bank Digital Currencies (CBDC), Rakiya Mohammed, Director of Information Technology Department Central Bank of Nigeria (CBN) stated that the use of cash is declining both locally, digital payments are rising very significantly, private monies (Cryptocurrencies) seem to be filling a gap that central banks may have ignored and not surprising that 85% of central banks are now considering CBDCs.

In her words: “Nigeria is basically following an irreversible global trend as overwhelming majority of Central Banks across the world have started to consider issuing digital currencies in order to cater for businesses and households seeking faster, safer, easier and cheaper means of payment.”

She continued: “In fact, a handful of countries including China, Bahamas and Cambodia have already issued their own Digital Currencies. A 2021 survey of Central Bank around the world by the Swiss-based Bank for International Settlements (BIS) found that 86% are actively researching the potential for CBDCs, 60% were experimenting with the technology and 14% were deploying pilot projects.”

While explaining the need for Central Bank Digital Currency in Nigeria, Mohammed said, “for macroeconomic management and growth, Cross Border Trade Facilitation, Financial Inclusion, Monetary Policy Effectiveness, FX Reserve Accretion, improved payment efficiency, revenue and tax collection, remittances improvement and targeted social interventions”.

Francis Gbenga Shobo, Deputy CEO of First Bank Nigeria who represented Dr. Adesola Adeduntan MD/CEO First Bank of Nigeria, during his presentation said CBDC is an advance representation of money for digital economy. “CBDC offer in digital forms the unique advantages of central bank money, settlement finality, liquidity and integrity. The competitive structure of the underlining payment system and data government arrangement determine the ultimate benefits of adopting a new payment technology”.

In his word: “The same technology can encourage a virtuous circle of greater access, lower costs, and better services may equally induce a vicious circle of data silos, market power and anti-competitive practices. The central bank of Nigeria’s eNaira is designed with the public interest in mind.

“The retail CBDC should ensure open payment platform and a competitive level playing field that is conducive to innovation. CBDC create a huge opportunity in big data collection, simplification of tax collections and helps eliminate middle men in financial transactions translates to global transaction cost which brings in more inclusion.”

He advised that banks should be less selfish around this and also be looking at the bigger picture. CBCDs are direct liability of the central bank that are backed by the government while cryptocurrencies are private sectors issued. They do not represent the liabilities of any government or central authority.

Commenting on the need for CBDC, Papuna Lezhava, Vice Governor, Board Member at National Bank of Georgia noted: “The major reason why we push for CBDC is for development like instant payment, the transactions speed, the underlying technical features, accessibility and wide range of new marketing of business model and some technological benefit.”

Speaking on motivations for retail CBDC, Benedicte Nolens, Head of BIS innovation Hub Hong Kong Centre, said: “Motivations are jurisdiction specific. However, it often bears relation to Achieve financial inclusion for those without bank accounts, desire to ensure competitiveness of wallets in highly digital markets by pursuing interoperability.”

She added: “To Address concerns around sovereignty resulting from increased use of other digital currencies, incl, crypto currencies (which are often unregulated and unsupervised; making it hard to separate legitimate from illegitimate transactions) and foreign currency stable-coin (which enable 24/7 global payment through regulated and unregulated wallets). To be distinct from private sector provided electronic payment, retail CBDC must be legal tender and unit of account, medium of exchange and store of value.”

“While an electronic form of cash, cash is here to stay as economies transition to digital as cash is a very inclusive payment method. Also, to be of equal utility to cash, retail CBDC must support online and offline payment. On the longer-term horizon, potential rise of regulated digital assets will require settlement with digital currency for optimal efficiency, much like we can see in the 24/7 crypto markets,” she noted.


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