Nigeria has become the first African country to launch a Central Bank Digital Currency (CBDC), eNaira. The government is looking to use it to expand access to banking facilities, increase remittance and also grow the economy in the long run.
Nigeria is the second country in the world to officially launch a CBDC. It follows the Bahamas that launched the Sand Dollar. Several other countries are looking at the CBDCs’ way. China is one of the countries with an advanced CBDC platform. Even though the digital Yuan is still in the testing stages, various entities have begun embracing it. The International Monetary Fund (IMF) has also confirmed that more than 110 countries have plans to launch CBDCs.
The launch of the eNaira however came as a surprise. Even though Nigeria has been one of the leading crypto adopting countries, the government has never been pro digital currencies. With one of the most tech-savvy and vibrant youth populations, most of the youths have been looking to cryptos to work as an alternative to the declining Naira.
So far, the country has experienced hyperinflation with the Naira losing more than 55% of its value within the past five years. Cryptos like Bitcoin, therefore, have been acting like a hedge against the failing fiat currency. At the same time, the cryptos also provided the best alternative to government limited banking services access.
The Nigerian government has moved to stop digital currencies from taking over. This was evident when the government banned crypto-related services in the country in February. Still, this did nothing to stop the population from finding easy-to-access cryptos.
What does the eNaira mean for the crypto in the country?
To launch a CBDC is always an indication of a government that is ready to get the benefits of the growing digital economy. In Nigeria’s case, the government is responding to the overwhelming crypto demand. The government claims 33 banks, 120 merchants and 2000 customers have already registered for the eNaira services.
However, unlike the various countries with a clear framework on the CBDCs operation, the line around the eNaira is unclear. It’s not yet clear how the government plans on rolling out the currency while ensuring proper access. Given the move to cryptos by most Nigerians was due to the government’s financial control, it’s unclear whether the population will be comfortable with eNaira.
The use of CBDC is also not well stated. It is unclear whether the users could turn the eNaira to the traditional currencies or they could use it for transactions when buying goods and services. It is also not yet known whether the digital currencies will be accessed on physical locations or they will be entirely digital operations.
At the launch, the government did not seem ready to provide any clarifications on the same. The central bank of Nigeria only provided a nine-page FAQ document detailing the eNaira specifications. At the same time, only three TV stations were allowed at the launch and no questions were taken.
While the launch of the CBDC by Nigeria is good news for the crypto world, the several grey areas mean it has not much impact on the crypto market both in the country and the global landscape.