Nigeria, a country with one of the world’s highest cryptocurrency adoption rates, is set to become the first African nation to launch its own central bank digital currency (CBDC) today as President Muhammadu Buhari formally launches the eNaira.
- Nigeria’s CBDC, the eNaira, was initially scheduled to be launched on Oct. 1. The launch was delayed, however, to prepare for the country’s 61st Independence Day celebrations.
- In August, the Central Bank of Nigeria joined hands with Barbados-based fintech startup Bitt Inc. as technical partner for the CBDC project. The launch of the eNaira, which the CBN says is a culmination of several years of research “in advancing the boundaries of payments system in order to make financial transactions easier and seamless,” is the first phase of a CBDC pilot project called Project Giant. The eNaira will be a legal tender in the country and have non-interest-bearing CBDC status.
- In the first phase of the project, the CBN is responsible for the eNaira rollout which includes issuance, distribution, redemption and destruction of the currency. The launch of the eNaira is, therefore, just the first step in the process. “Given that the eNaira is a journey, the unveiling marks the first step in that journey, which will continue with a series of further modifications, capabilities and enhancements to the platforms,” Osita Nwanisobi, CBN Director of Corporate Communications, said in a statement on Saturday.
- It is important to note that the CBN banned cryptocurrency-related transactions through licensed banks in Nigeria in February, citing its high volatility and investment risks for citizens. It first announced its CBDC project in June, hoping to cushion the blow dealt by its crypto ban through banks and provide a safer alternative. But the de facto ban did little to control the country’s growing hunger for crypto as exchanges reported increasing registrations, according to a Guardian report. Nigeria has one of the highest crypto adoption rates in the world — Data from Paxful, the most popular crypto trading platform in Africa, shows that Nigeria is second only to the U.S. in terms of Bitcoin trades, according to a report by Quartz.
- The launch of the eNaira is causing mixed reactions — some are excited to see how it could enhance the payments systems in the country, while others are worried about how it could affect banks. According to VOA news, the eNaira website had over 1 million hits in the hours ahead of the initial launch, indicating mass interest. The Guardian reported that “bank executives are extremely worried that a widespread adoption of the eNaira could reduce the volume of businesses executed by banks and transaction revenues.” The source of concern is that eNaira transactions will be peer-to-peer and would not require the involvement of banks.
- Countries in other parts of the continent are also playing catch-up in the CBDC game. South Africa recently launched a trial of CBDCs for cross-border payments, while the central bank of Ghana is looking to make its digital currency, the e-Cedi, available to offline users soon. Morocco, Egypt and Kenya are in early stages of exploring CBDC pilot projects.