The Central Bank of Nigeria (CBN) has inked a contract with a digital currency partner as it steps up plans to launch a central bank digital currency (CBDC) in Africa’s most populous country.
The CBN has engaged a Barbados-based fintech company, Bitt, to help deliver a blockchain-based digital currency, which is due to be unveiled ‘later in the year’, the central bank announced this week. The move comes less than a month after the central bank of Ghana, another sizeable West African state, announced an agreement with German company Giesecke+Devrient (G+D) to test a CBDC.
The CBN said that there had been a ‘significant explosion in the use of digital payments and the rise in the digital economy’ and that its decision to launch a CBDC ‘follows an unmistakable global trend in which more than 85 per cent of central banks are now considering adopting digital currencies’.
The central bank, which has been running its digital currency explorations under the name ‘Project Giant’, said it had decided to digitise its currency, the naira, in 2017. The planned digital currency, the eNaira, has been developed through what the central bank described as a ‘long and thorough’ process.
CBN’s governor, Godwin Emefiele, 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.
‘Transformative’ potential
The eNaira would be a retail CBDC – also known as a ‘general purpose’ CBDC: a currency that would be available to the general population (as opposed to a wholesale CBDC, which is for interbank use).
Bitt put out its own announcement on the partnership – the company’s first with a central bank in Africa – stating that the eNaira will initially be publicly available to a ‘segment’ of Nigeria’s 211 million citizens and residents within the next four months.
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, Bitt states.
Bitt’s chief executive, Brian Popelka, said the “financial and humanitarian benefits that [Bitt’s] technology offers will be transformative, especially in the lives of those 50 million unbanked Nigerians.”
“Bitt is proud to partner the Central Bank of Nigeria to launch the first live retail CBDC in the largest economy in Africa,” he said. “We’re especially proud to do so in a country that’s well known for its fintech leadership. Digitising the Naira will benefit the entire Nigerian financial ecosystem.”
Bitt’s ‘DCash’ experience
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 ECCB is the monetary authority for an octet of island economies and is rolling out DCash in stages – the digital currency arrived on a fifth island at the end of July.
The CBN’s announcement said its selection of Bitt – ‘from among highly competitive bidders’ – hinged on its technological competence, efficiency, platform security, interoperability and implementation experience.
The eNaira will operate via Bitt’s ‘Digital Currency Management System’ (DCMS), which leverages blockchain-based distributed ledger technology and which, the company says, is currently licensed by national financial institutions in six countries across Central America and the Caribbean.
The National Bank of Belize, for example, has licensed components of Bitt’s DCMS for internal use and deployment to retail, enterprise and other clients. It will be packaged and marketed under the NBB-created brand ‘NBB Pay’.
Bitt, whose parent company is Salt Lake City-headquartered Medici Ventures, was named earlier this week as one of 15 companies – including major international banks, other fintechs and tech providers – that are finalists in a Monetary Authority of Singapore (MAS) competition to develop retail CBDC solutions. The winners of the ‘Global CBDC Challenge’ will be decided at the Singapore FinTech Festival from 8-12 November.
*** The Bank for International Settlements (BIS) announced this week that it was significantly extending its ‘Project Dunbar’ initiative to test CBDCs for international settlements: the South African Reserve Bank, Reserve Bank of Australia and Bank Negara Malaysia are joining the explorations, which already involve its Innovation Hub and MAS. Results are expected to be published in early 2022.
