Nigeria’s proposed digital currency, e-naira, is likely to be a welcome boost for ongoing efforts to reduce the number of Nigerians who are financially marginalized, the stakeholder leader said. However, according to Senator Ihenyen, president of the Nigerian Blockchain Technology Association (SIBAN), the success of such a digital currency will depend on its design.
According to reports, the digital currency proposed by the Central Bank of Nigeria (CBN), the pilot phase of which is scheduled to begin October 1, will be a central bank hybrid digital currency (CBDC). This means that e-naira combines retail and wholesale opportunities. According to the boss of SIBAN, this means the issuance of e-naira does not interfere with the activities of intermediaries such as banks and other financial institutions.
Ihenyen, meanwhile, said that he doesn’t believe that the electronic naira, which will be a digital version of fiat currency, “comes with a magic wand.” He explained:
Due to its influence on the current state of naira, while e-naira is a digital version of naira, it does not come with a magic wand. At best, it will make cross-border transactions and remittances cheaper and easier – two critical areas that Nigeria needs to improve. So if Nigeria needs to improve the economy. We need to get the basics right.
Bitcoins vs. E-Naira.
After CBN ordered banks to cease cryptocurrency operations in February, CBN periodically signaled its intention to introduce CBDCs into the Nigerian economy. Some analysts suspects the central bank has used a strategy to contain cryptocurrency trading while promoting e-naira. The aim of this strategy is to see how e-naira outperforms bitcoin in terms of popularity.
When asked if this was the case, Ihenyen questioned whether CBN or another digital currency issued by a central bank could replace Bitcoin. He cites very different intentions or goals from those who created decentralized cryptocurrencies like Bitcoin and those who insist on issuing CBDCs. Ihenyen states:
CBDCs and decentralized cryptocurrencies are worlds apart. Due to their nature and construction, they do not serve the same purpose. CBN has stated that the proposed electronic naira will run on a private and official blockchain operated by CBN. This is in stark contrast to the public and illegitimate design of Bitcoin and many other cryptocurrencies without a central authority. So it’s not about one replacing the other.
Instead of seeing it as a competitive innovation, the President of SIBAN said he sees cryptocurrencies and CBDCs as complementary. Therefore, Ihenyen suggested that during the launch of the CBDC, “a much-needed risk-based approach to regulating cryptocurrencies remains of paramount importance”. He added that in the banking and financial system, cryptocurrencies should be seen as a fintech innovation rather than a threat to the financial system.
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