Central Bank Digital Currencies (CBDCs) have been growing in popularity almost as rapidly, though not as vocally, as cryptocurrencies. Hence, it is unsurprising that the Nigerian Federal High Court joined a growing list to issue a Nigerian CBDC as legal tender.
What Project Giant is all about
Following four years of development, Nigeria finally launched its own CBDC on its 61st Independence Day on October 1. The launch follows several anti-crypto statements from Nigerian regulators and falls in a time when the Nigerian naira is experiencing fresh lows, forcing the central bank to enact tighter restrictions. The so-called eNaira is part of Project Giant and will introduce strict identity verification mandates for utilizing the digital currency.
It was developed by Bitt Inc, a Barbados-based fintech company that had previously developed the Eastern Caribbean Central Bank’s DCash digital currency. The Central Bank of Nigeria (CBN) underscored the importance of following the global CBDC trend upon announcing the partnership with Bitt Inc and proposed a hierarchical structure for the CBDC that would see the central bank at the apex of the pyramid servicing financial institutions and government agencies, who then pass on the currency to merchants and retail customers. The proclaimed goal is onboarding banked and unbanked Nigerians, the latter making up a third of the population. The eNaira will employ a three-tiered verification model with varying daily transaction limits for different tiers, depending on their existing financial record.
CBN hostile to crypto
All of that, of course, goes against anything cryptocurrencies stand for. It is thus not really surprising that the CBN banned banks and other financial institutions from servicing crypto exchanges back in February. Although this was supposedly not geared towards prohibiting crypto trading but to prevent the flow of crypto within the country’s banking sector, it essentially amounted to the same thing. The CEO of Nigerian crypto exchange Naijacrypto foresaw more anti-crypto regulation:
“Yes, we expect the CBN to champion even more anti-crypto policies, as it is clear it sees crypto as a hindrance to its monetary policy objectives even though data confirms that as a fallacy. Every crypto company in Nigeria should innovate ways to work within a restrictive system and think about jurisdictional changes.”
Whether Nigeria will follow China in fully “banning Bitcoin” is yet to be seen, but its CBDC clearly clashes with regular cryptocurrencies in design and purpose.
High Court approval makes eNaira a reality
With the High Court’s final approval on October 2 and the launch of the eNaira wallet to accompany it, the country’s CBDC will directly rival Bitcoin and other cryptocurrencies. Although central banks around the world warned that adopting a volatile asset as legal tender might do more harm than good, it’s questionable how true that is in Nigeria’s case, with the country struggling with exchange rate volatility of its own. Time will tell whether the El Salvadorian model of adopting Bitcoin or the Nigerian model of a central bank-issued currency will prevail.
