Plans by the Nigerian government to launch a digital currency on October 1 are gaining traction as the Central Bank of Nigeria (CBN) has formally engaged global fintech company, Bitt Inc., as technical partner for the proposed digital currency, also known as e-Naira.
This is coming as the International Monetary Fund (IMF) cautioned countries seeking to adopt the digital currency to be wary of its disadvantages.
CBN Governor, Godwin Emefiele, who announced the appointment of the technical partner in Abuja, said the Central Bank Digital Currency (CBDC) would bring about increased cross-border trade, accelerate financial inclusion, and lead to cheaper and faster remittance inflow.
According to him, the digital money, also known as cryptocurrency, would lead to easier targeted social interventions, as well as improvement in monetary policy effectiveness, payment systems efficiency, and tax collection.
In a statement, CBN’s Director, Corporate Communications Department, Mr. Osita Nwanisobi, quoted Emefiele to have said that the e-Naira project had been a long and thorough process for the apex bank following its resolve in 2017 to digitise the local currency after extensive research and exploration.
He explained that the CBN’s decision was in line with an unmistakable global trend in which over 85 per cent of central banks were considering adopting digital currencies in their countries.
The CBN pointed out that the selection of Bitt Inc. from among highly competitive bidders was based on the company’s technical competence, efficiency, platform security, interoperability, and implementation experience.
“In choosing Bitt Inc. the CBN will rely on the company’s tested and proven digital currency experience, which is already in circulation in several Eastern Caribbean countries.
“Bitt Inc. was key to the development and successful launch of the Central Bank Digital Currency (CBDC) pilot of the Eastern Caribbean Central Bank (ECCB) in April 2021,” the statement read.
Meanwhile, the IMF has reiterated that the demerits of adopting crypto-assets as national currency outweigh its merits.
In a blog post, titled: “Crypto-assets as National Currency? A Step Too Far,” the IMF acknowledged that the new digital forms of money had the potential to provide cheaper and faster payments, enhance financial inclusion, improve resilience and competition among payment providers, and facilitate cross-border transfers.
IMF stated that the potential benefits were not a straightforward process, as it required significant investment as well as difficult policy choices, such as clarifying the role of the public and private sectors in providing and regulating digital forms of money.
It observed that some countries might be tempted by a shortcut -adopting crypto-assets as national currencies, adding, “many are indeed secure, easy to access, and cheap to transact.”
The IMF stated, “We believe, however, that in most cases, risks and costs outweigh potential benefits. Crypto-assets are privately issued tokens based on cryptographic techniques and denominated in their own unit of account.
“Their value can be extremely volatile. Bitcoin, for instance, reached a peak of $65,000 in April and crashed to less than half that value two months later.
“And yet, Bitcoin lives on. For some, it is an opportunity to transact anonymously—for good or bad. For others, it is a means to diversify portfolios and hold a speculative asset that can bring riches but also significant losses.”
