Banks Fear as Nigeria Set To Become the First African Country to Launch Its Own Digital Currency

Nigeria, the most populous country in Africa and a country with one of the world’s highest crypto adoption rates, is set to become the first country in Africa to launch its own central bank digital currency (CBDC).

Nigeria is set to officially launch the eNaira that was initially slated to launch on 1st October 2021 but delayed due to the preparation of the country’s 61st Independence Day celebrations.

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As described by the central bank of Nigeria (CBN), the launch of eNaira is the result of years of research in advancing the boundaries of the payments system in order to make financial transactions easier and seamless.

This launch represents the first phase of the CBDC pilot project known as Project Giant. The digital currency will be a legal tender in the country and have non-interest-bearing CBDC status.

In a statement on Saturday 23rd October, Osita Nwanisobi, CBN Director of Corporate Communications, said:

“Given that the eNaira is a journey, the unveiling marks the first step in that journey, which will continue with a series of further modifications, capabilities and enhancements to the platforms.”

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It’s worth noting that the CBN banned crypto-related transactions via licensed banks in Nigeria back in February, citing its high volatility and investment risks. The launch of eNaira is targeted at creating a safer alternative to regular cryptocurrencies.

However, according to a Guardian report, the ban relatively has no effect on the use of various digital currencies in the country, as exchanges reported increasing registrations.

Based on data provided by Paxful, the most popular crypto exchange in Africa, Nigeria has one of the highest crypto adoption rates in the world. The data shows that Nigeria is second only to the United States in terms of crypto trading.

Why eNaira Launch Is a Cause of Worry for Banks

There have been mixed reactions around the launch of the eNaira. Some are excited to see how it would make transactions seamless, especially cross-border remittance, while others are pessimistic about its effect on banks.

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According to a Guardian report, bank executives are extremely worried that widespread adoption of the eNaira could reduce the volume of businesses executed by banks and transaction revenues.

This fear comes from the fact that eNaira transactions will be peer-to-peer (p2p), indicating that it needs no bank to operate.

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