Nigeria to begin the use of Digital Currencies on 1st October 2021.

The Central Bank of Nigeria (CBN) has revealed that the country will be adopting the use of a Central Bank Digital Currency (CBDC) from the 1st of October 2021. This news comes as an irony after the initial disengagement of all banking institutions from facilitating Crypto transactions earlier in the month of February.

The Central Bank of Nigeria (CBN) has announced its readiness and decision to commence the use of its Central Bank Digital Currency (CBDC) on 1st October 2021 which is equally the day she celebrates her independence. This development was mentioned at a press briefing conducted by Rakiya Mohammed, Director, IT Department at the CBN. The choice to adopt a CBDC comes as the end result of the long research conducted by the apex bank since 2017 probably emulating China and her closet neighbor Ghana who did so earlier this year.

More so, this final decision to adopt the use of CBDC in Nigeria serves as a fulfillment of the assurance given by the CBN governor Godwin Emefiele after the harsh ban placed on Crypto transactions with the banks by the government earlier in the month of February this year. In his words; “We are committed and I can assure everybody that digital currency will come to life even in Nigeria.”

What is CBDC？

CBDC is an acronym for Central Bank Digital Currency. It is a digitalized form of a Country's fiat currency (say Nigerian naira). This form of currency however, uses a digital token and with an electronic record to present a virtual form of the fiat currency of that country. This is quite different from Bitcoin and Altcoins, as CBDCs are centralized, monitored, and issued by the Central Bank of the country. It has the same functionality as the traditional fiat which includes the store of value, unit of account, general means of exchange and will always have a monetary reserve.

How to use the digital Naira:

A lot of video presentations and guidelines have been released across the social media to educate the masses on how to use this digital currency. According to the presentation also, the CBN will issue its own wallet called the “Speed wallet,” but the wallet will not compete with existing banks.

However, to use the digital-Naira to transact, users will have to download the speed wallet, validate their account on the wallet by using either their phone number, National Identity Number (NIN) or Bank Verification Number (BVN). Once successfully done, users can now proceed to use the wallet. Equally following the presentation it is expected that users will be able to send money using Peer-to-Peer (P2P) transactions through their wallets to other wallet holders, Person-to-Marchant/Business where digital-Naira users can pay for items to merchants who have the digital-Naira wallet and vice versa.

The presentation also indicated that subsequently after its adoption, the Government Ministries, Departments and Agencies (MDAs) will be enrolled and use the digital-Naira to make payments to their staff and members of the public once there is mass adoption of the digital-Naira and how citizens can make payment to MDAs using the digital-Naira.

Advantages of using the CBDC:

According to a recent circular issued by the acting Director, Corporate Communication, Osita Nwanisobi. In the circular, the CBN Governor, Godwin Emefiele, stated that the benefits of the central bank digital currency included the following:

* An increase in cross-border trade. *An accelerated financial transaction.

* A cheaper and faster remittance, inflows, and easy targeted social interventions.

* The Nigerian CBDC will come with the same benefits as that of cash but in the digital form, and every single digital currency will serve as the digital equivalent of legal tender.

Other advantages of the digital-Naira are:

* Enhancing the liquidity in the banking system of a developing country like Nigeria.

* Lower transaction fees.

* It will function exactly the same way as the physical naira (Fiat currency).

Disadvantages of CBDCs:

*It totally centralized and monitored by the Nigerian government.

*The use of CBDCs will all the more widen the gap between the rich and the poor.

* A huge percentage of Nigerians are not versatile with digital technology.

* There is no stable network to support digital transactions across the country.

*A greater percentage of the population do not run a Bank account.

The relationship between Bitcoin and CBDCs:

Both are indeed digital currencies that can be stored electronically and be used to carry out transactions remotely. However, an important difference between the two is decentralization. Bitcoin and Altcoins remains Decentralized and cannot be monitored by the government or external body while CBDC is highly centralized and fully monitored and controlled by the government.

Finally, CBN has announced Bitt Inc., a global fintech firm, as it's Technical Partner for its digital currency, dubbed eNaira, which would be unveiled before the end of this year.