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Waiting for the Invention of the Nigerian Digital Currency

 

 Recently, it was widely reported that Nigeria may launch a Central Bank Digital Currency (CBDC) by the end of 2021, according to a Central Bank official. 

Speaking at an online news briefing, Rakiya Mohammed, an information technology specialist at the Central Bank of Nigeria (CBN), said that the regulator has been exploring the possibility of CBDC for over two years, according to local media reports.

 “Before the end of the year, the Central Bank will be making special announcement and possibly launching a pilot scheme in order to be able to provide this kind of currency to the populace,” Mohammed said.

Nigerian authorities have been debating how to regulate the use of private cryptocurrencies in the country. Earlier this year, the CBN ordered all local banks to seek and shut down accounts tied to crypto platforms, although the governor of the bank later clarified that crypto trading is not banned in the country.

Meanwhile, cryptocurrency usage as a store of value and remittance tool is soaring in Nigeria, with Ray Youssef, the CEO of peer-to-peer lending platform, Paxful, saying that the African nation is its biggest market.

With the CBN saying it will lunch Nigeria’s own cryptocurrency at the end of 2021, the question many Nigerians are asking is, what will the economy gain from this? 

Nigeria is Africa’s largest economy and home to over 200 million people, boasting one of Africa’s largest number of young and tech-savvy people. It is, therefore, unsurprising to see such an entrepreneurial country recording the largest Bitcoin trading volume, according to data collated from UsefulTulips.org, which gathers trading volume from the world’s leading Bitcoin peer-to-peer crypto exchanges (Paxful and LocalBitcoins).

That ascent to crypto prominence is rooted in a sharp fall in remittances during the worst viral onslaught recorded in humanity, COVID 19, coupled with growing unrest among a significant number of Nigerian youths, with no jobs and little earning capacity.

Himanshu Kumar, a top crypto analyst, spoke on the endless opportunities Bitcoin can offer Nigerians as regards remittances, taking a cue from the small Central American country that recently adopted the pioneer Crypto asset as a legal means of payment.

“After El Salvador adopted Bitcoin as a legal tender, now many small and developing countries are going to legalise or at least bring rules around Crypto. Using Bitcoin as a legal form of payment will empower the Nigerian people and will help them get money from all around the world without paying a big chunk to the bank. Using Bitcoin gives power back to the people, especially for a country like Nigeria, it’s highly important,” Himanshu noted.

Data retrieved from Enhancing Financial Innovation & Access, a non-profit organisation funded by the UK Government’s Department for International Development (DFID) and the Bill & Melinda Gates Foundation, revealed 86 million Nigerian adults’ (80%) livelihoods were negatively affected by the pandemic in the year 2020.

Nigeria’s helmsman, President Buhari, faces an uphill task in reducing Africa’s most populated country’s alarming unemployment rate, hovering at 33% as of Q4 2020; taking into account that more than 60% of Nigeria’s working-age population is younger than 34. Coupled with the growing insecurity partly caused by fewer available jobs and very low purchasing power among many Nigerians, the digital currency should be a good option.

Nigeria’s President, in a recent interview, also acknowledged the Boko Haram insurgency in Northern Nigeria was largely fueled by youth unemployment and poverty.

The growing unrest in some of Nigeria’s geopolitical regions is partly due to high youth unemployment. With millions of hungry and disgruntled Nigerians increasingly becoming aggressive, it becomes imperative for President Buhari to support this disruptive technology, as the modern world is driven by economic means of survival.

Despite the Central Bank’s ban on Nigeria’s financial brands from dealing with crypto (in the face of reports that only 1.1% of the total $1 trillion global crypto transactions in 2019 were illicit), Africa’s largest oil producer reportedly has the world’s third-largest Bitcoin holdings as a percentage of gross domestic product.

The Nigerian legislative chambers launched an investigation into the viability of Bitcoin, but nothing positive emerged from that effort. Still, Nigerians are increasingly buying the pioneer crypto at a premium.

Data obtained from Google disclosed that Nigeria, with a $514 billion economy, is a country with a perfect score in the interest of Bitcoin, further helping areas with a significant number of unbanked people.

Using local geographical metrics, Nigerian states, with much lesser exposure to banking facilities when compared to Lagos, Nigeria’s major economic hub, had the higher level of interest in the flagship crypto on a state level, with Delta leading the list, followed by Anambra, Bayelsa, Ekiti, and Edo. This points to Bitcoin’s stronghold in many Nigerian states.

Juwon Adebayo, Head of Business Development FTX African Markets, highlighted some advantages the Crypto economy brings to Africa’s economic giant, especially in the area of boosting employment and foreign exchange earnings, as a growing number of Nigerians work remotely.

“The crypto industry is booming globally with a lot of millennials actively involved. Nigeria, despite not being supportive about Crypto assets, has surprisingly been at the top of the employment chart.

“Following the covid-19 pandemic, remote jobs have become rampant in the Nigerian workforce, with the youth at the forefront of these opportunities. This makes them earn mostly in foreign currency whilst hedging against the volatile local market,” Juwon Adebayo noted.

Nigeria stands to gain immensely from Blockchain technology, with PricewaterhouseCoopers reporting the global economy stands to gain about $1.7 trillion in the next decade via the use of Blockchain technology, thus creating numerous job openings.

The Twitter co-founder and CEO, Jack Dorsey, has prophesied that “the people of Nigeria will lead bitcoin”, despite the Nigerian authorities’ clamp-down on the trading of cryptocurrencies. Dorsey’s take was a direct reaction to an oped written by NFL star Russell Okung, in Bitcoin Magazine.

Okung, a Nigerian descendant and self-acclaimed Bitcoin proponent, advised Nigeria to focus on achieving “economic independence and financial sovereignty” by establishing a Bitcoin Standard.

Still, about $400 million worth of cryptocurrencies have been traded in Nigeria in 2021, Statista, a global market data tracker, said. The volume of trading places it behind only the United States and Russia in the world.

 Okung insists that the issue of setting standard is “urgent”, as the country has a “limited window”. He pointed to the finite supply of digital currency as one of its main attractions.

He claimed that Iran, Russia, China, North Korea and Kenya are already “mining or otherwise utilising bitcoin,” partly as a means of circumventing the United States sanctions that prevents them from full participation in the global financial system.

Other nations like Barbados, Singapore, and Malta have moved to become “bitcoin-friendly” in an effort to attract wealth and human capital through migration.  In all this, more Nigerians need crypto education to relate with platforms offering it in order to deepen participation