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Countdown to unveiling Nigeria’s digital currency

The announcement that the Central Bank of Nigeria will unveil its digital currency is a demonstration of the monetary authority’s proactive disposition in seeking to align the economy with global practices and payment systems, reports Group Business Editor, SIMEON EBULU00:10/08:10

With July, the second month in the middle of the year racing to an end, the days and weeks and months are closing in to when the Central Bank of Nigeria (CBN) plans to unveil its much awaited digital money. The CBN Director, Information Technology, Rakiya Mohammed said in early last month that Nigeria’s digital currency would be launched by the end of the year.

Mohammed, an Information Technology specialist, spoke at an online briefing at the end of the Bankers Committee’s meeting. She said the CBN has for over two years been exploring the technology to engage the upcoming development, affirming that before the end of the year, the apex bank will be addressing the issue frontally and possibly unveil a pilot scheme to provide this kind of currency to Nigerians.

She said when the scheme eventually comes on stream and becomes operational, the currency would complement cash notes, stating that the need to make remittances travel easier from abroad to Nigeria was one of the  reasons the apex bank is introducing the digital currency. Mohammed assured that the digital currency would be accessible to all Nigerians.

“just like everybody has access to cash, everybody will also have access to the CBN’s digital currency,” she said, adding that the decision by the apex bank to come up with its own digital currency, has been in the works for upwards of 24 months, a long enough time to identify latent risks and plug any envisaged, or potential loopholes.

While admitting that there are risks associated with the proposed digital currency, Muhammad, nevertheless, assured that the emergence of the CBN digital currency will not cause any disruption, or hiccups, as it is expected to operate alongside other virtual currencies.

Cryptocurrency trading

The road to what will eventually become the nation’s e-currency started on a somewhat bumpy terrain following the CBN’s reaction to the overly interest shown by Nigerians in cryptocurrency trading, including bitcoin. The trade gained ascendancy in the very short time that it debuted in Nigeria.

The concern raised by many that bitcoin, or cryptocurrency trading does not come under any form of official or monetary regulation fueled tears that allowing the trade to fester could result in loss of capital and investor funds if things went awry.

The same consideration may also have informed the CBN’s initial decision to forbid Deposit Money Banks  (DMBs) allowing their platforms to be used for any payments or money transfers for crypto currency dealers, including bitcoin. In a circular to banks and financial institutions in February, this year, the CBN directed the stopage, or facilitation of payments for cryptocurrency transactions.

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It also authorised banks and financial institutions to identify and close forthwith accounts associated with individuals or entities that carry out transactions in cryptocurrencies and others operating cryptocurrency exchanges. In lending credence to the directive, the CBN Governor, Godwin Emefiele, said cryptocurrencies were being used to facilitate scams and money laundering, which, according to him, were highly inimical to the economy and could further weaken the naira.

Expectedly, the central bank’s position was acquiesced to by the various anti-graft agencies – Economic and Financial Crimes Commission (EFCC), the Independent Corrupt Practices and Other Related Offences Commission (ICPC) and the Nigerian Financial Intelligence Unit (NFIU).

Accordingly, EFCC helmsman, Abdulrasheed Bawa, agreed that cryptocurrencies were avenues through which criminals laundered the proceeds of crime and illicit financial transactions, stating that the commission had recovered proceeds of cryptocurrencies  worth about $20 million from cybercriminals. His ICPC counterpart Bolaji Owasanoye, followed suit, saying cryptocurrencies could be employed to fund insurgencies.

Owosanoye was more categorical, pointing out that the #EndSARS protest against police brutality, which rocked the country in April, was largely financed through cryptocurrency.

The anti-graft agencies revealed that they  have some cases linked to cryptocurrencies but have been unable to track the suspects, admitting that it would be difficult to solve cases involving cryptocurrencies as their arrowheads were unknown.

Acting in alliance with the apex bank’s directive,  the Securities and Exchange Commission (SEC) suspended the approval of cryptocurrencies and related products in Nigeria.This volte-face came after its earlier indication to accept bitcoins. It, however, said it would allow their operators remaining in business only if such digital currencies are operating bank accounts within the Nigerian banking system.


But a flurry of reactions from within and outside the cryptocurrency community trailed the directive of the apex bank, causing fears that the ban could adversely impact fintechs and hinder the rising potential of the economy.

Considering the growing global popularity of the cryptocurrency phenomenon, which is being used in over 100 countries, and Nigeria’s rating as the second-largest user of virtual currencies globally, the CBN directive only succeeded in stirring anxiety in the cryptocurrency community.

The criticism against the regulator’s stance was so strident, it prompted a reaction from the number two man, Vice President Yemi Osinbajo. He counselled that rather than impose a blanket ban o cryptocurrencies’ transactions, the situation actually called for a more robust regulatory framework that addresses the concerns raised about the cryptos without killing the potential of digital currencies in Nigeria. Osinbajo’s advice may have prevailed afterall and possibly informed, or influenced the CBN’s volte face in announcing the now awaited digital currency anytime before December 31, 2021.

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Mohammed said: “In terms of human and institutional engagements, Nigeria is certainly behind the scale and the scope of what other countries in Asia, including China, Singapore and  Europe and other nations are doing,” adding: “It’s, however, not about doing it first, but rather doing it right.”


The Central Bank digital currencies would operate just like the money you see when you check your bank accounts online, Mohammed said, adding that the ‘digital Naira’ would be issued by the Central Bank of Nigeria and held directly in citizens’ digital wallet.

Instead of printing physical money, the CBN would use electronic coins or notes. The digital wallet would be accessible through smartphones. The government/monetary authorities could also decide whether they want citizens to create direct accounts with the CBN or operate the digital currency through Deposit Money Banks (DMBs) or commercial banks.


One benefit CBDCs could provide is in lowering the cost of cross-border payments. It’s  still 10 per cent or more on the average to send money from one country to another because of our antiquated corresponding banking system and the inefficiencies in our payment system. This particularly really hits people on the economic margins who probably work overseas and are trying to send money to their relatives across borders.

Digital currencies offer numerous advantages. As payments in digital currencies are made directly between the transacting parties without the need of any intermediaries, the transactions are usually instantaneous and at low-cost. This fares better compared to traditional payment methods that involve banks or clearing houses.

Digital currency-based electronic transactions also bring in the necessary record-keeping and transparency in dealings. The CBN listed the benefits of the proposed digital currency to include macro management and growth, cross border trade facilitation, financial inclusion, monetary policy effectiveness, improved payment efficiency, revenue tax collection, remittance improvement, and targeted social intervention.

Others are expansion of the financial technology (fintech) ecosystem through enhanced operational efficiency, opportunities for fintech start-ups in building services/products like financial inclusion that will contribute to the economic growth, and the creation of a new system complementing the traditional payment system.

Nigeria, according to recent reports, is at about about 60 per cent in financial inclusion and, against its 80 per cent target at the end of the year, steps should be taken to raise the bar of the nation’s financial inclusion. The CBN is of the view that its proposed digital currency would enhance the inclusion drive and reduce the cost of cash management, while at the time enabling innovations in the nation’s financial market.

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No doubt, there are downside risks in the CBDCs, and the one that come to the fore, especially in Nigeria, is power outage. For instance, if there is a dependence on CBDCs (but that is not the case as yet) and there is suddenly a massive power outage, it could jeopardise the entire system.

The other issue and the most feared which can compromise and rubbish the concept, is if there is a hack as is commonly being experienced in other businesses, even in the advanced countries.

The safetynet obviously would be for the CBN to continue to allow the traditional banking system to co-exist with the digital currency, or e-Naira and other forms of currencies as the case may be.

There are other concerns that have to do with bank-runs during economic instability. In such eventuality, the citizenry will resort to the CBDCs as the safer option to store their funds since they are being held with the CBN which is not likely to go under, but the MDBs would feel the heat and this could cause instability to the overall financial system.

Privacy may also become a huge issue, depending on how the digital currency is designed. There is a danger that the CBN may end up creating a central data. So, caution should be advised as payment data is really sensitive and gathering it in one place is really dangerous and they need to think about how that data would be protected and whether or not that data collection is necessary


To say there’s need to embark on a massive and widespread enlightenment prior to the introduction of the CBN e-currency, is an understatement. Given the literacy level, not just of formal education, even fintech availability and adaptation, coupled with the huge and pervading  practice of cash-based transactions and the informal nature of buying and selling in our markets, streets, just name it, for this concept to permeate all strata of the society will be an uphill task.

Notwithstanding the CBN’s objective of creating a digital currency that will help promote the cashless policy, the banking sector regulator should also be ready to undertake massive and diverse awareness programmes to ensure that its novel digital currency model will and can function for all classes of Nigerians.


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