Nigeria and Ghana set out to join digital currency race

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Nigeria and Ghana are rushing to adopt a central bank digital currency as they seek to ride the wave of cryptocurrency popularity in West Africa’s two largest economies.

The central banks of both countries have partnered with foreign financial technology companies to create digital versions of their currencies, joining the global train of countries exploring the initiative.

Nigeria, Africa’s largest economy, will launch its digital currency eNaira on October 1, while Ghana will test e-Cedi from this month.

Nigeria has seen a cryptocurrency boom, despite banks banning transactions, as people seek ways to escape the weakening naira and offset the high cost of living and unemployment in Africa’s most populous country.

“Nigerians are investing in cryptocurrency as a way to store value and transport their funds off the coast of the country,” said Ayodeji Ebo, head of retail investments at the investment firm based in Nigeria. Lagos Chapel Hill Denham.

“eNaira will be for transactional purposes.”

Central banks around the world are exploring ways to create virtual currency as legal tender following the growth of digital payments, cryptocurrency, and privately issued stablecoins.

CBDCs and so-called central bank-backed cryptocurrencies are both virtual money: CBDCs are issued and regulated by the central bank while the other is outside of government control.

China became the first major economy to pilot a digital currency last year. Since then, five countries have launched digital currencies, according to a CBDC tracker from the US think tank Atlantic Council.

Although some African countries like Kenya, South Africa and Rwanda are exploring the CBDCs, Nigeria and Ghana have already reached advanced stages.

– Step by step –

The Bank of Ghana has teamed up with the German company Giesecke + Devrient (G + D) to pilot the e-Cedi. The program is part of a larger plan to digitize the country and its government.

G + D will supply the technology which will be tested in a trial phase with local banks, payment service providers, consumers and others.

Nigeria selected global financial technology company Bitt Inc. for its launch of CBDC known as “Project Giant” after more than three years of digital currency research.

“The CBN will build on the company’s proven and proven track record of digital currency, which is already in circulation in several Eastern Caribbean countries,” said the Central Bank of Nigeria.

The new eNaira will be issued by the CBN as legal tender like the current naira currency and will run on the Hyperledger Fabric blockchain. It will also follow the official exchange rate.

From October 1, customers will be able to download the eNaira app and fund their mobile wallets using their existing bank accounts, according to CBN Governor Godwin Emefiele.

– Boom and worries –

Nigeria’s central bank has long been concerned about the impact of cryptocurrencies and stablecoins which are quickly becoming popular among tech-savvy young residents.

Young Nigerians continue to explore new ways to make money and store value in the face of double-digit unemployment and inflation as well as the collapse in the value of the local naira.

Earlier this year, Nigeria’s central bank ordered lenders to stop facilitating cryptocurrency transactions over allegations it was being used for money laundering and terrorist financing.

Despite the central bank ban, many Nigerians still bypass traditional sectors to use cryptocurrency for transactions abroad.

Emefiele says eNaira will benefit the Nigerian economy in many ways, from trading across borders to improving the efficiency of remittances.

Remittances fell to $ 17.2 billion last year, the lowest level since 2007.

Part of this was due to fallout from the Covid-19 pandemic, but observers say Nigerians abroad are moving away from official channels for cryptocurrency transactions seen as faster and more efficient.

Nigeria has climbed two steps this year to rank sixth in the world in crypto adoption, according to blockchain data platform Chainalysis.

Already, some analysts are questioning eNaira’s operating model, with Nigeria already using a host of existing electronic payment channels, including online banking and mobile apps.

“Digital currency relies heavily on smart devices,” said Joel Ogunsola, CEO of UK technology solutions company Prunedge.

“If you look at the number of people who have these devices in Nigeria, it almost seems like you are targeting the same market.”

But the chief economist for Nigeria at PwC, Andrew Nevin, said eNaira has the advantage of easier and lower transaction costs.

“The eNaira helps lower the cost of payment,” Nevin said. “It is in the interest of deploying broader technology, which is the basis of the central bank’s digital currency.”

str / pma / lth


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