Nigeria launches digital currency after banning cryptos

The Central Bank of Nigeria joined a growing list of emerging markets betting on digital money to cut transaction costs and boost participation in the formal financial system.

The digital currency and its underlining technology called blockchain is expected to increase Nigeria’s GDP and remittances, President Muhammadu Buhari said in televised speech at the launch in Abuja, the capital.

The issuance of the digital currency, called the eNaira, comes after the central bank earlier in February outlawed banks and financial institutions from transacting in or operating in cryptocurrencies as they posed a threat to the financial system.

Central bank digital currencies, or CBDCs, are national currency — unlike their crypto counterparts, such as bitcoin and ethereum, which are prized, in part, because they are not tied to fiat currency.

The eNaira will complement the physical naira, which has weakened 5.6% this year despite the central bank’s efforts to stabilise the currency.

The Central Bank of Nigeria in August selected Bitt as a technical partner to help create the currency that was initially due to be rolled out on 1 October.

Nigeria joins the Bahamas and the Eastern Caribbean Central Bank in being among the first jurisdictions in the world to roll out national digital currencies. China launched a pilot version of its “digital renminbi” earlier this year. In Africa, nations from Ghana to South Africa are testing digital forms of their legal tender to allow for faster and cheaper money transactions, without losing control over their monetary systems.

The Nigerian digital currency will complement bills in circulation and is expected to boost cross-border trade and financial inclusion, make transactions more efficient as well as improve monetary policy, according to the central bank.  — Reported by Emele Onu, (c) 2021 Bloomberg LP