An official with the Central Bank of Nigeria (CBN) told local news sources that the bank is hoping to launch a central bank digital currency (CBDC) “before the end of the year.”
The announcement was made by the director of IT for CBN, Rakiya Mohammed, during an online news briefing at a Bankers Committee meeting. She stated that the bank has been looking into the matter for the better part of two years and feels confident they have a viable product to launch before 2022. “Before the end of the year, the Central Bank will be making a special announcement and possibly launching a pilot scheme in order to be able to provide this kind of currency to the populace,” Mohammed stated.
CBN’s digital currency will not replace local naira cash notes but instead, act as a complementary currency option. The digital currency is also expected to make foreign remittances easier for Nigeria. Digital currencies offer more flexibility for remittances due to the lack of forex charges and third-party entities. This is also one of the reasons El Salvador recently adopted bitcoin as legal tender.
At this stage, experts are creating architecture and addressing privacy concerns. Much like China has done with the digital yuan, Nigeria has plans to launch a pilot program in select areas before a nationwide release. Mohammed added that the CBN estimates that 80% of central banks globally are looking into digital currencies and Nigeria does not want to be left in the dust.
Whether the 80% estimate is accurate, what is true is that several African countries are in similar stages of planning for CBDCs.
Yesterday, Tanzania’s President Samia Suluhu Hassan requested that the Central Bank of Tanzania begin looking into CBDCs. The speech was given at the inauguration of the Central Bank of Swahili building in Mwanza.
Ghana has also stated it was one of the first apex banks on the continent to introduce its CBDC. The Bank of Ghana’s government stated that the digital cedi was on its way toward implementation.
The South African Reserve Bank (SARB) also has plans on looking into the possibility of releasing its own digital currency by the end of next year.
Nigeria’s love/hate relationship with cryptocurrency
The CBDC announcement is a curious move for a nation that recently has been clamping down on cryptocurrencies over the last few months. Even going so far as to ban commercial banks and other financial institutions from doing business with cryptocurrency exchanges and instructing that accounts holding crypto be closed.
The official reason for this ban was that Nigerian officials believed that crypto exchanges and start-ups were adding to foreign currency shortages. Those shortages caused the depreciation of the naira on the black market. The ban was later amended to allow peer-to-peer crypto trading.