President Muhammadu Buhari of Nigeria inaugurated the country’s modern digital eNaira money on Monday, as the continent’s biggest economy sought to capitalize on the rising popularity of virtual currency & cryptocurrencies.
It is the first country in Sub-Saharan Africa to completely introduce a digital currency with the eNaira, joining China and a few other nations that already use or are testing central bank-regulated digital tender.
“We have become Africa’s first and one of the world’s first countries to offer virtual money to our people,” Buhari remarked during the unveiling.
Nigeria has experienced a surge in interest in cryptocurrency as individuals seek methods to prevent the naira’s depreciation and tackle the country’s high cost of living and unemployment.
CBDCs, or central bank-backed digital currencies, and cryptocurrencies are both forms of virtual money. However, CBDCs are legal currencies controlled by central banks, whilst cryptocurrencies are not regulated by governments.
As per the CBDC Atlantic Council’s monitoring project, five nations have already started CBDCs, with yet another 14 in the trial stage, including Sweden & South Korea. Ghana, in West Africa, is likewise preparing to establish its own CBDC.
Earlier this year, Nigeria’s central bank attempted to rein in the usage of cryptocurrencies by forcing banks to cancel accounts associated with such transactions.
‘Expansion of the tax base’
Despite the central bank’s prohibition, many Nigerians continue to avoid conventional industries in favor of cryptocurrencies for international purchases.
According to experts, digital currencies have the potential to lower transaction costs and facilitate cross-border transactions, while also increasing financial inclusion by allowing those without access to traditional banking to utilize their mobile phones.
“The usage of CBDCs may assist in the formalization of many more individuals and enterprises, hence boosting the country’s revenue base,” Buhari added.
The new eNaira currency, like the present naira, will be issued as legal money and will run here on Hyperledger Fabric Blockchain. Additionally, it will track the official rate.
According to the central bank, users will be able to install the eNaira app and fill their mobile wallets with their bank accounts.
Nigeria’s central bank has said that it would adjust the system after its introduction for promoting usage by those without access to banking, particularly in rural regions.
Nigeria, Africa’s biggest oil producer, is now grappling with the economic impact of the coronavirus outbreak and a precipitous decline in global petroleum prices.
Nigeria’s economy has recovered from its second crisis in five years just after the outbreak of the epidemic. However, inflation, particularly the cost of food, continues to be persistently high, and the naira remains weak versus the dollar.