EVALUATING NIGERIAS CDBC SINCE ITS LAUNCH
June 26, 2022 7:07 AM
Nigeria made history by being the first country in Africa to launch a digital currency, joining the Bahamas and the Eastern Caribbean Central Bank as the pioneering nations to launch national digital currencies.
On October 25, 2021, the central bank of Nigeria (CBN) formally introduced the eNaira. The air is a Central Bank Digital Currency (CDBC) that is issued by the CBN as legal tender and is backed by the law and the full sovereignty of Nigeria. It is the Naira in digital form.
Central bank digital currency, or CBDC for short, is a digital version of central bank currency that people can use to make payments online and hold value. Although available to everyone, CBDC is issued by the central bank. Utilizing the same underlying distributed ledger technology as cryptocurrencies.
In addition, the government recognizes CBDC as legal tender in the issuing central bank's jurisdiction, which means anyone can use them as payment and every business must accept them. Cryptocurrencies as we currently understand them are extremely volatile and lack government backing.
IS CBDC A CRYPTOCURRENCY?
NO! Although the concept of central bank digital currencies is inspired by cryptocurrencies and blockchain technology, CBDC is not a cryptocurrency because it is centralized, whereas cryptocurrencies are usually always decentralized. Meaning they can not be regulated by a single authority.
Although CBDC is more appropriate, cryptocurrencies have the advantages of being decentralized, private, and trusted. In the coming year, the CBDC VS. Crypto discussion will likely get louder.
WHY DID NIGERIA INTEODUCES ITS OWN CENTRAL BANK DIGITAL CURRENCIES, THE (CDBC)?
The process of developing a digital currency for Nigeria, according to President Muhammed Buhari, started sometime in 2007. He claimed that along with digital innovation, CBDC can foster economic growth through better economic activities, and it had claims to increase remittance and improve financial inclusion. In addition, it is also said to have been designed to be more stable and secure.
The CBN is responsible for safeguarding the nation's financial security, fostering and facilitating financial inclusion, and enabling direct welfare disbursement to citizens. Therefore, it has successfully examined the benefits and drawbacks, and even the risks, of having a CBDC. Certainly, the central bank of Nigeria won't adopt new technology if it isn't in the best interest of Nigeria.
HOW HAS NIGERIA'S DIGITAL CURRENCY PERFORRMED SINCE ITS LAUNCH?
Improvements are required in several payment-related areas. As of now, the central bank's digital currency increases the security and effectiveness of both wholesale and retail payment systems. On the wholesale side, it makes quilt settlement of retail payments easier and boosts the effectiveness of payments between parties or at the point of sale.
While central bank digital money promotes financial inclusion and allows for safer, quicker, and less expensive transactions, it also has some hazards for the financial industry and the whole economy.
So far, the CBDC has decreased illegal activities like fraud and money laundering. It has also decreased the cost of managing cash by lowering the costs of handling cash, printing cash, and cash destruction, saving the government money.
Due to the use of numerous intermediaries, cross-border payments were previously time-consuming and expensive. CBDC has now made them simpler. The population who lack access to banks has benefited from central banks' significant efforts and attention to central bank digital currencies.
The future of finance will be significantly impacted by CBDC, particularly the trading of securities and digital assets.
Digital currencies should become the norm throughout the world