International Monetary Fund (IMF), has confirmed that interest in the newly launched Nigerian central bank digital money (CBDC), is growing from many international institutions, including central banks. However, the CBDC is not recommended for implementation of monetary policies, cybersecurity, financial stability, or operational resilience.
CBDC attracts interest
In its latest country focus report authored by economist Jack Ree, the IMF explains why Nigeria’s new CBDC has drawn substantial interest from the outside world and from central banks in particular. The report notes that unlike other cryptocurrencies such as bitcoin and ethereum the e-naira is subject to strict access rights control by the central banks. The CBDC also draws its value, and unlike volatile cryptocurrency, from physical naira.
The IMF says that it is through such features that Nigeria’s Central Bank of Nigeria (CBN), hopes that its CBDC will provide multiple economic benefits for the country. The benefits envisaged include financial inclusion, and a reduction in informality.
CBDC Boon for Remittances
It also discusses why the CBN believes that CBDC will increase remittances to the country. It states that:
Remittances usually go through international money transfer agents (e.g. Western Union) and are charged fees of between 1 percent and 5 percent of transaction value. The eNaira should lower remittance transfers costs. This will make it simpler for Nigerian diaspora members to send funds to Nigeria.
The IMF report also reiterates the common opinion that CBDC deposits could function as central bank deposits and decrease demand for commercial bank deposits. There are other potential risks to the CBDC, according to the IMF report. “Relying as it does on digital technology, there is a need to manage cybersecurity and operational risks associated with the eNaira,” the author writes.
The report concludes that the IMF was still available for technical advice and policy guidance to the CBN because it was part of the e-naira rollout.
Do you agree with the IMF’s comments about the Nigerian CBDC? Please comment below to let us know your thoughts.
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