In a significant step forward for state-backed digital money, Africa’s most populous country is going live this week with a central bank digital currency (CBDC).
President Muhammadu Buhari is launching the blockchain-based ‘eNaira’ today (25 October), making Nigeria the first country in Africa – and one of the first in the world – to digitise its currency.
The Central Bank of Nigeria (CBN) described the eNaira as being on a ‘journey’, saying that the unveiling ‘marks the first step in that journey, which will continue with a series of further modifications, capabilities and enhancements to the platforms’.
‘The eNaira marks a major step forward in the evolution of money and the CBN is
committed to ensuring that the eNaira, like the physical Naira, is accessible by everyone,’ the CBN said in a statement released ahead of the launch.
The central bank is working with Barbados-based fintech company Bitt as technical partner on the delivery of the eNaira, which is being promoted by the slogan ‘Same Naira, more possibilities’.
Cheaper and faster remittances
The CBN said when it announced the Bitt partnership that its decision to launch a CBDC ‘follow[ed] an unmistakable global trend in which more than 85 per cent of central banks are now considering adopting digital currencies’.
CBN’s governor, Godwin Emefiele, has listed the benefits to Nigeria of launching a state-backed digital currency as including increased cross-border trade, accelerated financial inclusion, cheaper and faster remittance inflows, easier targeted social interventions, as well as improvements in monetary policy effectiveness, payment systems efficiency and tax collection.
Bitt put out its own announcement on the partnership – the company’s first with a central bank in Africa – in August stating that the eNaira would initially be publicly available to a ‘segment’ of Nigeria’s 211 million population.
Remittances are a significant part of life for many Nigerians, particularly for those who are unbanked – estimated to be almost a quarter of the population – with remittances to the country amounting to more than $17.2bn (about £12.4bn) during 2020, according to World Bank figures. The eNaira will enable direct remittance payments between Nigerians within and outside of the country, according to Bitt.
Bitt developed the first retail CBDC live within a currency union: the Eastern Caribbean Central Bank (ECCB)’s blockchain-based ‘DCash’, which launched earlier this year. The eNaira will operate via Bitt’s ‘Digital Currency Management System’ (DCMS), which leverages blockchain-based distributed ledger technology.
‘Additional features’ anticipated
In its statement on the launch, the CBN said that it would ‘continue to work with relevant partners to ensure a seamless process that will benefit every user, particularly those in the rural areas and the unbanked population’.
‘Since the eNaira is a new product, and among the first CBDCs in the world, we have put a structure to promptly address any issue that might arise from the pilot implementation of the eNaira,’ the central bank said.
In a blog post issued today, Bitt’s chief executive Brian Popelka said the team behind the eNaira was “elated to have developed, tested and deployed the eNaira monetary infrastructure in record time.”
“We look forward to continued partnership on this CBDC deployment journey and to provide additional features to expand eNaira’s value to all Nigerians,” Popelka added.
The eNaira was originally scheduled to launch at the start of October but the CBN pushed back proceedings ‘due to other key activities lined up to commemorate the country’s 61st independence anniversary’, according to an update on the central bank’s Facebook page on 30 September.
Ghana looks at smart-cards for offline functionality
Elsewhere in Africa, Ghana is also making progress with its own plans for a CBDC.
Global Government Fintech reported in August that Ghana’s central bank had partnered German company Giesecke+Devrient (G+D) to test a retail CBDC and that the project would have three phases: design, implementation and pilot. G+D’s CBDC solution is known as ‘Filia’, which enables ‘secure, consecutive offline payments in case no network connection is available’, according to the Munich-headquartered company.
According to a Bloomberg report last week, Bank of Ghana’s head of fintech and innovation Kwame Oppong has said the use of smart-cards to enable the planned ‘e-cedi’ to work offline was being explored.
“What we hope to be able to do – and we’re one of the people pioneering this – is that the e-cedi would also be capable of being used in an offline environment through some smart cards,” the news agency quoted Oppong as saying at the Ghana Economic Forum.
The Bahamas launched its CDBC one year ago, with its ‘Sand Dollar’ becoming the first fully deployed digital version of a country’s fiat currency. A growing number of leading central banks have started experimenting with retail CBDCs but most major nations have yet to commit to launch a CBDC.
South African Reserve Bank announced in May that it had embarked on a study to explore the ‘feasibility, desirability and appropriateness’ of a potential digital rand. Its retail CBDC explorations follow work the central bank had already been progressing in the wholesale space.
FURTHER READING
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