Why Nigerians will accept CBN’s digital currency —CSL Research

NIGERIA being the second world largest bitcoin market suggests easy acceptability of Central Bank of Nigeria’s (CBN) planned digital currency by Nigerians.

Also, it complements the CBN’s efforts in achieving its financial inclusion drive, analysts from CSL Research have said.

According to them, digital currency presents a leeway to eliminate obstacles associated with traditional cash payments, especially security.

At the last Monetary Policy Committee (MPC) meeting held on the May 24 and 25, 2021, the CBN governor, Godwin Emefiele, hinted at plans made by the apex bank to issue the country’s digital currency.

While no definite timeframe for issuance was reported by the governor, he noted that a steering committee had been established to investigate the practicalities of issuing the country’s own sovereign digital currency.

Earlier in February 2021, the Central Bank of Nigeria (CBN) directed all Deposit Money Banks (DMBs), Non-Bank Financial Institutions (NBFIs) and Other Financial Institutions (OFIs) to desist from all transactions relating to cryptocurrencies and close all related accounts of customers dealing in cryptocurrency.

It is no news that this directive was met with criticisms from the public as many stakeholders saw the decision as irrational especially at a time cryptocurrency was gaining widespread acceptance.

“From our viewpoint, we recognize the validity of some of the CBN’s fears since the digital asset has no fundamental value and is extremely volatile and encrypted. This makes it difficult to investigate or trace any fraudulent or malicious practices such as money laundering, terrorism financing, and other misuses when transactions are carried out using cryptocurrencies.

“A state-backed and controlled digital currency however mitigates many of these risks to a large extent. According to a survey conducted by the Bank for International Settlements (BIS) on central bank digital currency (CBDC), over 75 per cent of the 65 central banks under survey have shown interest in the possibility of issuing a virtual currency,” CSL analysts submutted in a note to clients.

While some central banks are at the research conduct phase, others are on the path to a pilot or implementation stage.

“In our opinion, the use of a central bank digital currency is largely dependent on local circumstances peculiar to each country. Currently, many countries are exploring the pros and cons of having a digital currency while assessing its impact on money supply stability.

“Specifically for Nigeria, the use of a digital currency fully backed by monetary authorities presents a leeway to eliminate obstacles associated with traditional cash payments, especially security.

Besides, the nation being the second world largest bitcoin market suggests easy acceptability by Nigerians. Also, it complements the CBN’s efforts in achieving its financial inclusion drive,” they said.

In addition, the research firm also recognize that the year 2020 witnessed the launch of the world’s first general-purpose or retail CBDC for households and businesses in the Bahamas, the Sand Dollar (the digital version of the Bahamian currency).

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