The Central Bank of Nigeria has joined a growing list of emerging markets betting on digital money to reduce transaction costs and boost participation in the formal financial system.
“Nigeria has become the first country in Africa and one of the first in the world to introduce a digital currency to its citizens,” President Muhammadu Buhari said in a televised speech at the launch in Abuja, the capital. “The adoption of the central bank’s digital currency and its underlying technology, called blockchain, can increase Nigeria’s gross domestic product by $ 29 billion over the next 10 years.”
The International Monetary Fund projects that the GDP of Africa’s largest economy will be $ 480 billion in 2021.
The issuance of the digital currency, called eNaira, comes after the central bank earlier in February banned banks and financial institutions from trading or operating in cryptocurrencies because they posed a threat to the financial system.
Since the launch of the eNaira platform, it has received over 2.5 million daily visits, with 33 banks integrated on the platform, 500 million naira ($ 1.2 million) successfully minted and more of 2,000 integrated customers, central bank governor Godwin Emefiele said at the launch. .
Central bank digital currencies, or CBDCs, are national currencies, unlike their crypto counterparts, such as Bitcoin and Ethereum, which are prized, in part, because they are unrelated to fiat money. The eNaira will complement the physical naira, which has weakened 5.6% this year despite efforts by the central bank to stabilize the currency.
“The eNaira and the physical naira will have the same value and will always trade one naira for one eNaira,” Emefiele said.
Digital currency is expected to boost cross-border trade and financial inclusion, make transactions more efficient and improve monetary policy, according to the central bank.
“Along with digital innovations, CBDCs can foster economic growth through better economic activities, increase remittances, improve financial inclusion and make monetary policy more efficient,” said Buhari. Digital money can also “help move many more people and businesses from the informal sector to the formal sector, thereby increasing the country’s tax base,” he said.
The Central Bank of Nigeria selected Bitt Inc. in August as a technical partner to help create the currency that was originally due to be introduced on October 1.
Nigeria joins the Bahamas and the Eastern Caribbean Central Bank in being among the first jurisdictions in the world to deploy national digital currencies. China launched a pilot version of its “digital renminbi” earlier this year. In Africa, countries from Ghana to South Africa are testing digital forms of their legal tender to enable faster and cheaper monetary transactions, without losing control of their monetary systems.