The PDF version of this statement is available here.
We are the Blockchain Industry Coordinating Committee of Nigeria (BICCoN), the intercommunity working group set up by stakeholders in January 2021 to provide an intercommunity approach to blockchain technology adoption towards achieving a more collaborative, innovative, and safer blockchain ecosystem in Nigeria.
Adoption of a Digital Naira by the CBN
We note the CBN’s disclosure of its plan to launch a digital Naira by the end of 2021. This disclosure was reportedly made at the news briefing at the end of the Bankers Committee meeting on Thursday 11 June 2021 by Mrs Rakiya Mohammed, an Information Technology Specialist with CBN. According to reports, the CBN will be making a special announcement and possibly launching a pilot scheme before the introduction of the central bank digital currency (CBDC).
We commend the CBN for considering the adoption of a CBDC in Nigeria. Being the digital form of a central bank money, a CBDC has the potential of enabling faster and cheaper transactions and remittances, enhancing financial inclusion, and supporting monetary-policy development in Nigeria.
The evolving digital economy requires a digital currency system that is optimized for digital commerce. The potentials of blockchain and other distributed ledger technologies (DLTs) have brought about new entrants into payment services and intermediation around the world. Apart from a declining use of cash in some countries, there is increasing attention towards decentralized or private digital currencies or tokens. Today, the adoption of such digital currencies continues to grow in Nigeria and globally.
While it is presently unclear if the CBN will be adopting a general purpose, token-based, retail CBDC or a wholesale, account-based, transaction-settlement CBDC, our expectations—both as blockchain industry stakeholders and potential users—are as follow:
- Before adopting a CBDC in Nigeria, it is critical that the CBN comprehensively considers the pros and cons of a digital Naira in the country’s emerging digital economy, and its potential impact on the banking and financial system;
- While over 80% of central banks across the world have shown interest in possibly adopting CBDCs, the development of the digital Naira in Nigeria should be based on the country’s specific socio-economic and political circumstances as well as the country’s digital and cybersecurity infrastructure and market needs;
- The adoption of a digital Naira should leverage the growth and development in Nigeria’s FinTech ecosystem in order to achieve widespread adoption in the country;
- The CBDC project should be used to promote, support, and boost Nigeria’s emerging digital economy, improve cross-border remittances and transactions, and promote financial inclusion;
- The CBN should consider initiating CBDC awareness and sensitization programs, webinars, and other initiatives in order to properly educate the members of the public who are the potential adopters of the digital Naira;
- Considering the continued growth in the adoption of cryptocurrencies in Nigeria despite the CBN’s restriction of banks and other financial institutions from providing services to cryptocurrency entities and traders in Nigeria in February 2021, the need to adopt a risk-based approach to cryptocurrency adoption is advised; and
- Considering the wide impact the adoption of a digital Naira may have on the Nigerian economy and the society at large and the need to mobilize adequate support for the successful launch and implementation of the digital Naira, a multi-stakeholder approach with stakeholders from both public and private sectors, including the youth and the general public, is necessary.
Given the impact the adoption of a digital Naira will most likely have on the Nigerian economy, we believe that the CBN’s plan to explore various technological options, engage various industry players, and implement a proof of concept to pilot the scheme will be beneficial to all stakeholders and the members of the general public. With such a multi-pronged approach, the CBN can be assured of BICCoN’s support.