The Launch of the Digital Naira and its Likely Impact

Proshare

Thursday August 05, 202/ 09:17 AM / By FDC Ltd / Header Image Credit: Shutterstock

 

The Central Bank of Nigeria (CBN) recently announced plans to launch its own digital currency before the end of the year. The 'digital Naira' would be issued by the CBN and held in digital wallets. Nigeria is now set to join countries like China (digital yuan), Bahamas (sand dollar), Eastern Caribbean (DCash) that have officially launched their own national digital currencies.

 


Digital not Crypto

 

While the recent surge - and plunge - in cryptocurrencies took the world by storm, many sceptics still dismiss them as the fool's gold, and lacking in most of the fundamental properties of a fiat currency (medium of exchange, store of value and a unit of account). At this juncture, it is important to note that digital currencies are not the same as cryptocurrencies. While all cryptocurrencies are digital currencies, not all digital currencies are cryptocurrencies. How do they differ? Regulation! Digital currencies are forms of money or cash available in non-physical (electronic/virtual) forms, typically issued by Central Banks and are subject to all the scrutiny and government backing of fiat currencies. They are also only accessible via internet-enabled devices. Cryptocurrencies, while being digital are not issued by Central banks or tied to any entity - governments/institutions/individuals. Crucially, the crypto space is devoid of regulation, hence the wild fluctuations witnessed daily in response to market forces.


Proshare Nigeria Pvt. Ltd.



Blockchain the Disruptor

 

However, all digital currencies rely on blockchain technology. Known as distributed ledger technology (DLT), it is a digital platform and database that allows digital information to be distributed but not copied. Originally created to authenticate bitcoin (the most popular cryptocurrency), it was designed as a way to centralize record-keeping without needing third-party authorization - like a bank or a regulator. It enables users to record, track, and validate peer-to-peer transactions. Confirmation of records is done by multiple users with access to the data. It keeps a permanent record of all transactions, keeps users information anonymous while all activity is secure and unchangeable. But beyond recording financial transactions, it can be used to record practically everything of value. The digital naira will employ the use of the Hyperledger Fabric blockchain.



More Pro than Con...hopefully

 

While the risks associated with the growing use of digital currencies are clear and evolving, the CBN is banking on embracing the emerging digital world and reaping its benefits. The CBN would use electronic coins or notes instead of printing physical money. This would lower the costs of currency management. The use of digital currencies will cut off intermediaries like banks or clearinghouses and drastically lower the cost and time involved in cross-border transactions. Remittances and trade finance, especially with the launch of AfCFTA, will be major beneficiaries. The speed of transactions will increase and enhance the velocity of circulation of money, which will boost economic activity.



The adoption of a digital currency will facilitate financial inclusion by increasing the share of the population with access to financial products. It would enable banks bridge this gap by circumventing legacy infrastructure - and the attendant costs - especially in the rural communities. This would allow Nigeria's informal economy go mainstream, giving them access to services like credit and insurance, allowing them expand their business and maximize potential - by so doing, stimulating the wider economy.


 

The CBN will now need to create sufficient awareness of its digital currency project and its benefits given the perception of most Nigerians who have come to associate crypto-currency use to online scams.

 

Related Video

1.       CIBN Hosts Discourse on Blockchain Tech in Nigeria - Feb 28, 2017


Proshare Nigeria Pvt. Ltd. 


Related News - Digital Assets

1.       CBN Targets October 1 for Digital Currency Launch - Jul 23, 2021

2.       Legally Speaking, is Digital Money Really Money? - Jan 14, 2021

3.       Ghana Launches World's First Digital Finance Policy Amid COVID-19 - Jan 08, 2021

4.       Banks and Thrifts May Participate in INVN and Use Stablecoins for Payment Activities - Jan 05, 2021

5.       IOSCO Publishes Report on Education of Retail Investors Regarding Risks of Crypto-Assets  - Dec 24, 2020

6.       How Central Banks Can Catalyze Financial Inclusion Through Digital Currency - Oct 16, 2020

7.       Regulation of Cryptocurrency and Digital Assets In Nigeria: New Beginnings - Oct 15, 2020

8.       Stakeholders Call for Clarity in Regulation and Standardization of Nigeria's Digital Asset Market - Sep 28, 2020

9.       Digital Assets Classification Aimed at Investor Protection - SEC - Sep 21, 2020

10.   SEC Nigeria Issues Statement on Digital Assets, Their Classification and Treatment - Sep 14, 2020

11.   China Starts Major Trial of State-Run Digital Currency - Apr 30, 2020

12.   Analysts Discuss Blockchain Technology and Regulation of Digital Assets in Nigeria - Nov 18, 2019

13.   Winds of Change: The Case for New Digital Currency - Nov 15, 2018

14.   Barclays Files Two Digital Currency and Blockchain Patents with U.S. Patent Office - Jul 21, 2018

15.   Saudi Arabia Capital Market Authority Warns Investors Against Digital Currency Investment - Feb 13, 2018

16.   Distributed Ledger Tech Solutions For Settlement Of Payments Using Central Bank Digital Currency - Oct 13, 2017

17.   China Is Developing its Own Digital Currency - Mar 04, 2017

18.   Sweden’s Central Bank Considers Issuing A Digital Currency - Nov 16, 2016

 

 

 Proshare Nigeria Pvt. Ltd. 


 

Related News - BlockChain & Cryptos

1.       The Changing Face of Finance, A New System Beckons

2.       Top Five Microcap Crypto Projects in 2021

3.       How Does Blockchain Technology Work?

4.       The Cryptocurrency Frenzy: A Call for Caution

5.       Bitcoin Price Crash: Is This the End of the Bitcoin Bubble?

6.       Most Important Things You Should Know About Bitcoin

7.       Central Bank of Portugal Grants First Crypto Exchanges Operating Licenses

8.       Things You Need to Consider Before Using Crypto Signals

9.       CBN to Launch Digital Currency Before December

10.   E-Cedi: Bank of Ghana to Pilot Digital Currency

11.   Digital Currency: A Right Move to be Adopted by the CBN?

12.   Why Bitcoin May Speed Up the Transition to Renewable Energy

13.   Potential of Blockchain for Financial Inclusion in Nigeria

14.   US Treasury Calls for Stricter Cryptocurrency Compliance With IRS, Says They Pose Tax Evasion Risk

15.   Central Bank Digital Currencies May Disrupt Financial Systems

16.   What is Driving the Proliferation of Cryptocurrencies in Nigeria?

17.   Should One Invest in Altcoins?

18.   CoinNewsExtra TV to Increase Enlightenment on Blockchain, Crypto Assets in Nigeria

19.   Examining the legality of Non-Fungible Tokens (NFTs)

 

 

Proshare Nigeria Pvt. Ltd.

 

Related News - Monetary Policy

1.      Is the Economy Spiraling? - LBS Executive Breakfast Session - February 2021

2.      Total Value of Capital Importation into Nigeria Stood at US$1,069.68m in Q4 2020 - NBS

3.      Rebasing Nigeria's GDP: New National Accounts, More Services

4.      Diaspora Remittances in Nigeria: Examining the New CBN Policy (2)

5.      Diaspora Remittances in Nigeria: Examining The New CBN Policy (1)

6.      Inflationary Pressure Still Straining Pockets

7.      CBN Deals the House Card as Policy Rates Remain Unchanged

8.      CBN Communique No. 134 of the MPC Meeting - Jan 25-26, 2021

9.      MPC Holds All Policy Parameters at the End of Its First Meeting in 2021

10.  Monetary and Interest Rate Policy in 2021: Going for Growth

11.  CBN to Sustain Expansionary Monetary Policy Till Q1, 2021 - Cordros Securities

12.  Ten MPC Members, One Shared Outlook

13.  Personal Statements By The MPC Members At The 133 MPC Meeting of Nov 23-24, 2020

14.  CBN Rolls the Dice to Tackle Market Liquidity and Dollar Dearth

15.  Implications of CBN's Introduction of Its Special Bills to the Market

16.  CBN Introduces Special Bills to Deepen the Financial Markets, An Additional Liquidity Mgmt Tool

 

 

Proshare Nigeria Pvt. Ltd.

 

Related News - New Rules & Regulations in Nigeria Capital Market

1.       Crowdfunding Rules and Regulations in Nigeria Released by SEC

2.      Collective Investment Schemes General Rules and Regulations in Nigeria Released by SEC

3.      Nominee Companies Rules and Regulations in Nigeria Released by SEC

4.      Fund Management Products Rules and Regulations in Nigeria Released by SEC

5.      Payment of Administrative Charges Rules and Regulations in Nigeria Released by SEC

6.      Annual Supervision Fees for CIS Rules and Regulations in Nigeria Released by SEC

7.      Sundry Amendment to Valuation Report Rules and Regulations in Nigeria Released by SEC

8.     Sundry Amendment to Amount to be Underwritten Rules and Regulations in Nigeria Released by SEC

9.      Investment by CIS in Unlisted Securities Rules and Regulations in Nigeria Released by SEC

10.  Sundry Amendment to Contents of a Trust Deed Rules and Regulations in Nigeria Released by SEC

11.   Steps on Unclaimed Dividend Retrieval Process as Highlighted by SEC Nigeria

12.  SEC Requests CMOs to Disclose Security Dealings of 500,000 Units Within 24hrs of Activity

13.  Revision of Stamp Duty on NSE Transactions to 0.08% from 0.075% Effective 7th December 2020

14.  SEC Proposes Amendment to Its Rule on Renewal of Registration by CMOs

15.  SEC Issues Pre-Notice on Withdrawal of Certificates of Registration of 157 Inactive CMOs

16.  SEC to Discontinue the Practice of Issuing Prior Approval for Audited Accounts of CIS

17.   IOSCO Publishes Report on Education of Retail Investors Regarding Risks of Crypto-Assets  

 

 Proshare Nigeria Pvt. Ltd.

READ MORE:
Related News
SCROLL TO TOP