The International Monetary Fund (IMF) has asserted that the newly launched Nigerian central bank digital currency (CBDC) is commanding interest from many institutions globally, including central banks. Still, the body advises that the CBDC is a little risky for monetary policy implementation, cybersecurity, operational resilience, financial integrity and stability.
In its recent country focus report written by Jack Ree, an economist, the IMF explains why Nigeria’s new digital currency has attracted significant interest from other countries and their central banks in particular.
In the report, the writer remarks that the e-naira, unlike cryptocurrencies like bitcoin and ethereum, features rigid access right control by the central bank. Also, unlike volatile cryptocurrencies, the CBDC draws its value from the physical naira.
According to the IMF, the Central Bank of Nigeria (CBN) believes that with these features the CBDC will bring several advantages to the Nigerian economy. Some of the conceived benefits include an improvement in financial inclusion and reduced informality.
The report explains further why the Central Bank of Nigeria is optimistic that the CBDC will increase remittances into the country. The report states:
“Remittances typically are made through International money transfer operators (e.g., Western Union) with fees ranging from 1 per cent to 5 percent of the value of the transaction. The e-naira is expected to lower remittance transfer costs, making it easier for the Nigerian diaspora to remit funds to Nigeria by obtaining e-naira from international money transfer operators and transferring them to recipients in Nigeria by wallet-to-wallet transfers free of charge.”
The CBDC however may limit deposits in commercial banks as the deposit function will roll directly to the central bank through the CBDC.
Conclusively, the report states that the IMF, which was involved in the rollout process of the e-naira, remains accessible to help the CBN with technical assistance and policy advice.
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