The Central Bank of Nigeria (CBN) has announced that it may pilot its central bank digital currency (CBDC) as early as October 1 of this year, said Rakiya Mohammed, CBN’s director of information technology, during a webinar last Thursday.
Like many developing countries, Nigeria is faced with the problem of financial inclusion. Currently, its rate of financial inclusion stands at just 60 percent. As a digital form of cash, a CBDC would help make cash more accessible and enable the population to participate in Nigeria’s growing e-commerce economy.
The central bank is also motivated by the high volumes of remittances that Nigeria receives. In 2020, Nigeria was the tenth largest remittance recipient in the world. A CBDC could reduce the cost of these low value, high volume transactions sent by Nigerians working abroad to their families back home.
Meanwhile, back in February, the central bank reiterated its ban on banks transacting with cryptocurrency entities. Since then, it has pushed for careful regulation, rather than a prohibition of cryptocurrency, reports Vanguard
“There is a role for regulation here. And it is in the place of both our monetary authorities and SEC to provide a robust regulatory regime that addresses these serious concerns without killing the goose that might lay the golden eggs”, said the Vice President Yemi Osinbajo at the Bankers Committee Vanguard in February.
An e-naira might provide a counter to the rise of virtual currencies, which are steadily growing in popularity in the African nation.
Nigeria has been researching its digital currency since 2017, and last month revealed its plans for a pilot phase during the final quarter of 2021.
This makes Nigeria the second West African nation in 2021 to recently declare a launch date for the pilot phase of its CBDC. Leading the way is the Bank of Ghana, which has indicated that it will begin testing its digital cedi by September.
Meanwhile, India also declared last week that it may soon be piloting its digital rupee. The potential for using a CBDC for cross border payments is also featuring prominently, including the latest trial between France and Tunisia.