Nigeria’s proposed digital currency, the e-naira, is likely to be a welcome boost to ongoing efforts to reduce the number of Nigerians that are financially excluded, a leader of a stakeholders’ body has said. However, according to Senator Ihenyen, the president of Stakeholders in Blockchain Technology Association of Nigeria (SIBAN), the success of such a digital currency will depend on its design.
As per reports, the Central Bank of Nigeria (CBN)’s proposed digital currency, whose piloting phase is set to commence on October 1, will be a hybrid central bank digital currency (CBDC). This means the e-naira will be combining both the retail and wholesale capabilities. This according to the SIBAN boss means the issuing of the e-naira will not disruptive to the operations of intermediaries such as banks and other financial institutions.
Meanwhile, Ihenyen told Bitcoin.com News that he does not think the e-naira, which will be a digital version of the fiat currency, “comes with a magic wand.” He explained:
On its effect on the current state of the naira, as long as the e-naira is a digital version of the naira, it comes with no magic wand. At best, it will make cross-border transactions and remittances cheaper and easier—two critical areas Nigeria needs to improve. So Nigeria must fix the economy. We must get the fundamentals right.
Since directing banks to stop serving crypto entities back in February, the CBN has regularly signaled its desire to bring a CBDC into the Nigerian economy. Some analysts have suggested that the central bank has resorted to a strategy where it stifles crypto trading while it promotes the e-naira. The objective is of this strategy is to see the e-naira overtake bitcoin in popularity terms.
However, when asked if this was the case, Ihenyen expressed doubts if a CBN or any other central bank-issued digital currency can ever replace bitcoin. He cites the very different intentions or objectives of those that created decentralized cryptocurrencies like bitcoin and those pushing for the issuing of CBDCs. Ihenyen explained:
CBDCs and decentralized cryptocurrencies are a world apart. By their nature and by design, they do not serve the same purpose. The CBN has pointed out that the proposed e-naira would run on a private and permissioned blockchain which would be governed by the CBN. This is in sharp contrast to the public and permissionless design of bitcoin and many other cryptocurrencies with no central authority. So it is not really a matter of one replacing the other.
Therefore, instead of viewing them as rival innovations, the SIBAN president says he sees cryptocurrencies and CBDCs complementing each other. Consequently, Ihenyen suggests that while CBDCs are being rolled out, the “much-needed risk-based approach to cryptocurrency regulation remains vital.” He adds that cryptocurrencies in the banking and financial system should be seen as fintech innovations and not as a threat to the financial system.