The Bahamas and Cambodia are among the other countries that have already introduced CBDCs while Nigeria is the first in Africa.
More African countries are considering introducing central bank digital currencies (CBDCs) after Nigeria’s eNaira, which launched on October 25, saw robust uptake and attracted global attention.
According to the IMF, the eNaira is a “liability” of the Central Bank of Nigeria (CBN), and uses the same blockchain technology as Bitcoin or Ethereum. It is pegged 1-to-1 to the physical naira currency. It can be “stored in digital wallets and can be used for payment transactions” and is able to be “transferred digitally” at no cost.
Imran Khan, head of partnerships at Bitt, a financial-software company working with central banks on digital transformation, believes that the introduction of the e-Naira “is a journey, and the first launch is for banked” users, especially those with smartphones.
Bloomberg quoted the Central Bank of Nigeria, which says the application for the eNaira has been downloaded nearly 500,000 times within a month, while as many as 78,000 merchants signed up for the platform from over 160 countries.
The Bahamas and Cambodia are among the other countries that have already introduced CBDCs, while Nigeria is the first in Africa. Nonetheless, bans on cryptocurrencies remain in place for most African countries with the exception of South Africa, which already regulates and taxes virtual currencies.
“The eNaira is expected to lower remittance transfer costs, making it easier for the Nigerian diaspora to remit funds to Nigeria by obtaining eNaira from international money-transfer operators and transferring them to recipients in Nigeria by wallet-to-wallet transfers, free of charge,” said Jack Ree, who works in the African department at the IMF.
Rahul Shah, head of Financials Equity Research at emerging markets insights firm Tellimer, revealed that other African markets poised to follow Nigeria’s lead include Ghana, Mauritius and South Africa.