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Why Nigeria needs a digital currency – CBN

Oluwasina Phillip

The Central Bank of Nigeria has explained the economic implications and importance of a centralized and regulated digital currency in Nigeria.

The apex bank had earlier revealed that it would be launching e-naira, a digital equivalent of the naira in October, in line with global trends.

According to the Director, Information and Technology, CBN, Rakitya Muhammed, the introduction of the e-naira can catalyze Nigeria’s digital economy, boost cross border trade and enable better macroeconomic policy formulation.

Muhammed spoke virtually at the Third Quarter Industry Forum of the Committee of E-business Industry Heads held in Abuja on Wednesday.

She spoke on the theme, “Digital Currency and the Prospects of Central Bank Digital Currency in Nigeria”.
She said, “If people adopt more of the usage of the e-naira, then we will be able to have more data to formulate better macroeconomic policies.

“And when countries come on board and create their own digital currencies, then we will be able to have faster exchange of currencies and therefore we might be able to boost cross border trade at a much lower cost.

“Of-course payment efficiency, even though we know that Nigeria has one of the best payment systems in the world, we will still be able to improve on that.”

“We believe that the e-naira will be a catalyst for digital economy because the people who are outside the formal banking sector will be integrated.”

Speaking on the e-naira design, Muhammed disclosed that the design would soon be revealed as the apex bank had concluded its development.
The e-naira, she noted, will be a legal tender like the fiat naira, it will not replace but complementary the naira and anonymity of transactions is guaranteed.

“In terms of the e-naira design, it will be a legal tender just like cash which is one of the fundamental differences between it and the cryptocurrency.

“One e-naira will be equal to one fiat naira, and we adopted a two-tier retail model that would be a lot less disruption into the financial system.

“Our banks, payment service providers and Fintech are all going to be onboard and we are going to key to the infrastructure they have already and incorporate the new system.

“It is not meant to replace the cash we have only to supplement.
“We chose an account-based implementation because we want to tie the wallet to the digital identity of the user.

“It would be value based which means that we will see the amount of money changing hands without necessarily seeing who is behind the transactions so anonymity is complete and absolute.

“This will allow us to be able to conduct their AML/KYC operations. It is going to be non-interest bearing at least for now,” the director noted.

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