Nigeria’s central bank could launch a central bank digital currency pilot by the end of 2021. The West African country has been cracking down on digital currencies for months, but according to one report, it has been working on the digital naira all this while. Nigeria will be targeting financial inclusion and remittances with its CBDC.
Nigeria has made headlines in the digital currency industry this year for all the wrong reasons. In February, the Central Bank of Nigeria issued a decree prohibiting all commercial banks from servicing clients involved in digital currencies. The CBN governor has been defending the ban since then, claiming that it was in the interest of protecting consumer interest. It has even incentivized the citizens who turn to mainstream remittance channels in fear of losing this sector to digital currency firms.
However, as Reuters has revealed recently, the CBN was working on a CBDC all this while. The director of information technology at the bank Rakiya Mohammed revealed in a recent industry forum that the bank has been working on the project for two years now. He claimed that the bank will likely be making more announcements about its digital naira advances in coming weeks.
In a virtual briefing with the country’s bankers, Mohammed stated, “We’re all aware that about 80% of central banks in the world exploring the possibility of issuing central bank digital currency, and Nigeria cannot be left behind.”
As with many other central banks exploring CBDCs, financial inclusion is one of the key reasons CBN has embarked on the project. The country has over 100 million adults, and of these, only about 45 million have a bank account. Of the unbanked, about 30 million have no access to any formal or informal financial services or products. The CBDC could thus be a godsend for tens of millions of Nigerians.
The CBN will also be targeting the remittance sector. This sector is critical to the Nigerian economy, with the country among the world’s biggest recipients of remittances. In 2020, it received $17 billion, and while this was down by over 60%, Nigeria still ranked tenth globally, and second in Africa after Egypt.
Mohammed commented, “If you have a central bank digital currency that is backed by the government, then people can make transactions online without fear of any default.”
The move by Nigeria comes at a time when other African countries are pushing for the adoption of digital currencies. As CoinGeek reported, the Tanzanian president Samia Suluhu has called on the country’s central bank to look into digital currencies to ensure the East African country doesn’t lag behind as its peers adopt them.
To learn more about central bank digital currencies and some of the design decisions that need to be considered when creating and launching it, read nChain’s CBDC playbook.
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