The Central Bank of Nigeria (CBN) has released its digital currency, the e-naira, to rival the growing popularity of private cryptocurrencies like Bitcoin (BTC). This has sparked controversy regarding its adoption rate, use cases, and its potential threat to the economy.
In an Oct 9 press release, the CBN stated that the Central Bank Digital Currency (CBDC) is not a threat to financial stability, urging all stakeholders to accept its use. This was in response to a report by local news outlet Punch on the dangers posed by the e-naira. It cited the CBN’s report, “Economics of Digital Currency,” which warned about conversions from fiat to digital currency. The report suggests that the economy may be impacted as funds converted to digital wallets become domiciled with the top bank without access to commercial banks for loans and other financial activities.
“Since its inception, bank deposit conversion to e-naira has exhibited an average monthly growth of 78.3 percent and totaled about N1.66bn ($2.1 million). Furthermore, eNaira in circulation as a ratio of average banking system liquidity has averaged 0.1 percent, reaching highs of 0.2 percent in each of May and August 2022.”
The CBN clarified that its previous report does not indicate any harmful effect of the e-naira on the economy, suggesting a lack of understanding of the report. It also reiterated the threat posed by private cryptocurrencies to the economy based on their use as speculative investments.
“A recurring theme in the book is the interest of regulators, such as the CBN, in the role of cryptocurrencies as speculative investments, and the potential threat they harbour for financial stability. Pursuant to that, the articles in the book provide an in-depth understanding of CBDCs generally and the workings of the eNaira in particular, highlighting issues and challenges in implementation and adoption”
The CBN also announced that it will continue improving the e-naira in structure and user interfaces across multiple platforms. Recently, several use cases have been announced for the e-naira as it seeks to make payments easier for traders, farmers, and students. On the economy, the digital currency has been praised by financial experts for widening the tax net as it adds new demographics who were almost absent from the economy leveraging on the blockchain.
