Nigeria‘s Central Bank has introduced a new digital currency, becoming the first African nation to do so and only the third central bank in the world to offer its citizen this option as an alternative to traditional money.
The new eNaira launched this week with 2,000 customers onboarded and 500 million digital coins, the equivalent of $1.2 million available on the platform, Al Jazeera reports. While cryptocurrencies grew in popularity specifically because they are not tied to government-issued money backed by a commodity like gold, central bank digital currencies (CBDCs) are in fact another form of national currency.
“The eNaira and the physical naira will have the same value and will always exchange at one naira to one eNaira,” explains central bank Governor Godwin Emefiele.
Nigeria’s CBDC comes after similar currencies released by the Bahamas and the Eastern Caribbean Central Bank, though China is currently piloting a similar program. Several other African nations, including Ghana and South Africa, are in the testing phase of digitizing their currencies, which would allow faster, cheaper transactions without a negative impact on their local economies. CBDCs are expected to make international trade easier across the board. Nigerian president Muhammadu Buhari also points out that the eNaira will allow more people and businesses to step into the formal sector, adding to the country’s tax base.
“The adoption of the central bank digital currency and its underlying technology, called blockchain, can increase Nigeria’s gross domestic product by $29 billion over the next 10 years,” says Nigerian president Muhammadu Buhari. “Alongside digital innovations, CBDCs can foster economic growth through better economic activities, increase remittances, improve financial inclusion and make monetary policy more effective.”
Ahead of its entry into the CBDC world, Nigeria’s central bank imposed sanctions last year to prevent other banks and financial institutions from issuing or accepting cryptocurrencies, for fear that they might undermine the local economy. The new eNaira platform did, however, integrate 33 banks in its launch.