Nigeria launched on Monday a digital currency (eNaira), the central bank said, months after it barred banks and financial institutions from dealing in or facilitating transactions in cryptocurrencies.
Nigeria joins 14 other countries now in the pilot stages with their own central bank digital currencies (CBDCs), including China, South Korea, and Sweden, with a total of 81 countries in other stages of exploring CBDCs.
Since the launch, the eNaira platform received more than 2.5 million daily visits, with 33 banks integrated on the platform, 500 million c ($1.2 million) successfully minted, and more than 2,000 customers onboarded, said central bank Governor Godwin Emefiele.
“The eNaira and the physical naira will have the same value and will always exchange at one naira to one eNaira,” Emefiele noted.
According to Nigeria’s central bank, the CBDC is expected to boost cross-border trade and financial inclusion, make transactions more efficient, as well as improve monetary policy.
Cryptocurrencies like Bitcoin highlight the potential of money’s digital future despite being created outside the confines of the traditional global banking system. And its sharp rise in adoption has led to a scuffle with legacy institutions in determining the future of money.
The argument against cryptocurrencies has typically focused on concerns around fraud and volatility. That hasn’t stopped some countries, like El Salvador, from using Bitcoin as a legal tender. For others that see Bitcoin and cryptocurrencies as a threat to their national banking and financial systems, CBDCs act as direct replacements for rising interest in something other than fiat.
“The concept of CBDCs has become a necessity for central banks. Money is a tool for controlling people,” Chimezie Chuta, founder and coordinator of Blockchain Nigeria User Group, told TechCrunch. “They do not want to allow the primary tool of control to be eroded because the entrance of privately issued cryptocurrencies like Bitcoin and Ethereum is a direct challenge to central banks’ authority everywhere in the world. CBDCs come in as their response, albeit weak ones.”
While cryptocurrencies are pretty independent, digital currencies hold the same value as their paper counterparts. In Nigeria’s case, the eNaira will be pegged to the naira, with its value fluctuating against the U.S. dollar, just as the naira does.
Another significant difference between CBDCs and cryptocurrencies is that the former is subjected to regulation and control — common themes at the heart of governments in China and Nigeria.
The International Monetary Fund projects GDP for Africa’s largest economy to be $480 billion in 2021.
The issuance of the digital currency, called the eNaira, comes after the central bank earlier in February outlawed banks and financial institutions from transacting or operating in cryptocurrencies as they posed a threat to the financial system.