The Central Bank of Nigeria joined a growing list of emerging markets betting on government-backed digital money to cut transaction costs and boost participation in the formal financial system.
The digital currency and its underlining technology called blockchain is expected to increase Nigeria’s GDP and remittances, President Muhammadu Buhari said in televised speech at the launch in Abuja, the capital.
The issuance of the digital currency, called the eNaira, comes after the central bank earlier in February outlawed banks and financial institutions from transacting in or operating in cryptocurrencies as they posed a threat to the financial system.
Central bank digital currencies (CBDCs), are national currency — unlike their crypto counterparts, such as bitcoin and ethereum, which are prized, in part, because they are not tied to fiat currency.
The eNaira will complement the physical naira, which has weakened 5.6% this year despite the central bank’s efforts to stabilise the currency.
The Central Bank of Nigeria in August selected Bitt as a technical partner to help create the currency that was initially due to be rolled out on 1 October.
Nigeria joins the Bahamas and the Eastern Caribbean Central Bank in being among the first jurisdictions in the world to roll out national digital currencies. China launched a pilot version of its “digital renminbi” earlier this year. In Africa, nations from Ghana to South Africa are testing digital forms of their legal tender to allow for faster and cheaper money transactions, without losing control over their monetary systems.
The Nigerian digital currency will complement bills in circulation and is expected to boost cross-border trade and financial inclusion, make transactions more efficient as well as improve monetary policy, according to the central bank.
In Ghana the central bank is currently piloting the e-cedi is a sandbox, where some 500 selected entities are using it to trade. The central bank said it will take lessons from the pilot, do all the necessary fixes before opening it up for the general public.
The central bank has secured a German partner, Giesecke+Devrient (G+D) for the implementation of the e-cedi piloting in Ghana.
First Deputy Governor of the central bank, Dr. Maxwell Opoku-Afari assured Ghanaians that e-cedi is much safer and more secure than any cryptocurrency because it is backed by the state and it is regulated.
Earlier in the year, the central bank cautioned Ghanaians against signing up to apps and websites trading in cryptocurrency, saying that none of those entities have been authorized by the central bank to render such services.