Digital currency or CBDC’s are a becoming a thing these days. Nations are racing to get a taste of this new technology. Nigeria has become the first country in Africa to introduce a digital currency to its citizens. It became headlines earlier in February when the Central Bank of Nigeria banned cryptocurrencies in the country. They said posed severe threat to the financial system.
Guess what, they were paving the way to launch a Digital Currency of their own, the eNaira. The President of Nigeria, Muhammadu Buhari said in televised speech at the launch in Abuja, the capital. “The adoption of the central bank digital currency and its underlying technology, called blockchain, can increase Nigeria’s gross domestic product by $29 billion over the next 10 years.”
On the world stage, only China and a handful of countries have launched their own versions of digital currencies. Other countries are also piloting or making plans to have their own digital currencies.
Central Bank Digital Currency (CBDC)
Central bank digital currencies, or CBDCs, are national currencies. Unlike cryptocurrencies, such as Bitcoin and Ethereum, which are prized, in part, because they are not tied to fiat currency. The eNaira will complement the physical naira, which has weakened 5.6% this year despite the central bank’s efforts to stabilize the currency.
“The eNaira and the physical naira will have the same value. It will always exchange at one naira to one eNaira,” Emefiele said.
Nigeria joins the Bahamas and the Eastern Caribbean Central Bank in being among the first jurisdictions in the world to roll out national digital currencies. China launched a pilot version of its “digital renminbi” earlier this year.
Other African nations such as Ghana and South Africa are testing digital forms of their legal tender to allow for faster and cheaper money transactions, without losing control over their monetary systems.
There is a growing list of emerging markets across the world betting on digital currencies. It is believed it will help cut transaction costs and boost participation in the formal financial system.
