Nigeria joins China, Brazil and others to launch its own digital currency
The Central Bank of Nigeria plans to launch its own central bank digital currency (CBDC) by the end of the year in Africa’s largest economy and most populous nation.
Rakiya Mohammed, an information technology specialist at the Central Bank of Nigeria (CBN), disclosed that the bank has been exploring the concept of a digital currency (CBDC) for the last two years and a ‘special announcement’ shall come soon.
While the information revealed is vague, Mohammed’s announcement confirms that Nigerian authorities are actively considering CBDC as a viable alternative and intend to pursue it as soon as possible.
Mohammed said CBN estimates show that 80% of central banks globally are looking into digital currencies and Nigeria does not want to be left behind.
CBN’s digital currency will not replace local naira cash notes but instead, act as a complementary currency option. The digital currency is also expected to make foreign remittances easier for Nigeria. Digital currencies offer more flexibility for remittances due to the lack of forex charges and third-party entities.
The cryptocurrency world is undergoing a period of rapid progression as governments and companies globally grapple with how they can leverage the technology for maximum returns.
China and Brazil, like Nigeria, are working on its own CBDC that will work as an extension of the physical currency that already exists.
Nigerian authorities are currently brainstorming the architecture, accessibility and privacy concerns of the system. The initial roll-out shall be a pilot program, similar to what China’s been trying with e-yuan — also known as just digital yuan.
Nigeria began to clamp down on cryptocurrencies at the beginning of 2021 and barred commercial banks and other financial institutions from servicing crypto exchanges.
Unlike cryptocurrencies like Bitcoin or Ethereum, which are decentralized block-chains and entirely dependent on market forces, a CBDC — central bank digital currency — is an instrument that replaces a physical banknote with a digital token or record.
It’s available exclusively in digital form and can only be issued by banks as well as selected financial institutions. A central bank can record and verify all CBDC transactions. Meanwhile, there’s no gold or other commodity reserve to back it.
However, unveiling a CBDC is an extremely complex undertaking that requires years of planning, testing, and scaling. China leads the race currently and its pilot program is already active in a few cities.
Several African countries are in similar stages of planning for digital currencies. Ghana has stated it was one of the first apex banks on the continent to introduce its CBDC. The Bank of Ghana’s government stated that the digital cedi was on its way toward implementation.
The South African Reserve Bank (SARB) also has plans on looking into the possibility of releasing its own digital currency by the end of next year.