By: Muhammad L Yakubu, Ph.D.
The Central Bank of Nigeria (CBN) announced the selection of Technical Partner for Digital Currency Project via a Press Release dated August 30, 2021 signed by its Director, Corporate Communications, Osita Nwanisobi.
Bitt Inc., a global Fintech Company, has formally been engaged as the Technical Partner for the CBN digital currency, named eNaira, which is due to unveiled later in the year (2021).
By creating its cryptocurrency, CBN will improve its policy effectiveness and systems efficiency by cutting out the middlemen and unnecessary bottlenecks.
The Blockchain technology has brought numerous benefits which may result to pushing private banks out of the equation in order to better serve the people.
Currently, Central Bank prints money to lend to commercial banks, who in turn lend to corporations and individuals. However, blockchain technology could facilitate the democratization of the monetary system by fusing the individual with the Central Bank. CBN cryptocurrency, digital money is the way to go. That would kill more than two birds with one stone.
We need to cut out the middlemen. The CBN gives money to the banks they lend to corporations. Now what if the CBN wants to stimulate the economy and gives every taxpayer in Nigeria a digital account. The money goes directly to the CBN. The whole point is cutting the middlemen.
In June 2021, the Financial Times reported that “nearly 90 percent of the world’s Central Banks have launched projects on issuing digital currencies, according to the Bank for International Settlements.” Central Bank-backed digital currencies would be issued, backed and controlled by domestic national banks – such as the Central Bank of Nigeria. It is seen as a way for Central Banks to compete with the current decentralized model.
Blockchain technology would challenge the private banks monopoly of the payment system. And unless otherwise, they imbibe creative innovations and restructure their services portfolio, their business models would be obsolete.
With a digital account linked to the Central Bank, money could be directly deposited to individuals when the economy needs stimulation. The process would be transparent while also maintaining anonymity. With a Central Bank digital reserve based on blockchain, everybody would know how much money is in the system. That’s how the blockchain could help create a political version of cryptocurrency, that can be controlled democratically.
The benefits of the Central Bank Digital Currency (CBDC) mentioned in the Press Release include: increased cross-border trade, accelerated financial inclusion, cheaper and faster remittance inflows, easier targeted social interventions, as well as improvements in monetary policy effectiveness, payment systems efficiency, and tax collection.