How digital currency will ease transaction cost
...as CBN finalises plans for rollout before year-end
Nigerians would begin to enjoy reduced cost of transaction and cash management as the Central Bank of Nigeria (CBN) is finalising plans to roll out its own digital currency before the end of the year, as it finds ways to regulate the virtual currency space in the country.
CBN Director, Information Technology, Rukiyat Mohammed, announced this at the end of the virtual Bankers committee meeting held on Thursday.
The CBN had in February, placed restrictions on cryptocurrencies, directing banks not to use, hold, trade and/or transact in cryptocurrencies, citing risks in inability to regulate the highly volatile market.
“Before the end of the year, the Central Bank will be making an announcement and possibly launching a pilot scheme in order to be able to provide this kind of currency,” Mohammed explained.
She further explained that other digital currency like the Bitcoin and cryptocurrency are not under the control of the CBN, and that they purely personal decisions which individuals make.
“We have spent over two years studying this concept of central bank digital currency and yes, there are risks that we have identified and that is one of the reasons I said we are setting up a central governance structure that will involve al industry stakeholders to look at some of these risks even as we continue on our journey.
“Very soon, we will make an announcement as regards the date or if we will launch this, but yes, by the end of this year, we should be able to have something for the currency.
On whether the other digital currencies will be used alongside the planned CBN digital currency, the director explained that “cryptocurrencies are not under the control of CBN. People are still transacting in cryptocurrency on their own and nobody has stopped them, but whether they will work alongside, these are some of the decisions that have to be taken as we progress into this journey.”
She said the Central Bank digital currency will complement the local currency and will be as good as one having cash in his pocket.
She said the digital currency was being considered on the back of the present global demand, citing the remittances which is a huge market in Africa “we all know how long instructions take for money to be sent to or received from abroad.”
The digital currency she said would help the country to achieve the 80 percent financial inclusion target, which it missed in 2020.
The currency will also help ease the process and cost of transaction, currency management, as well as complement CBN’s cashless policy.
It would also enable innovation in the payment system in the country, enabling Nigerians to be able to transact more, online.
When launched, the digital currency will be accessible to everybody just the way the local currency is accessible to everyone today, she said.
“Just like everybody has access to cash, everybody can have access to the Central Bank digital currency,” she stated.
Mohammed said the CBN will, in a few weeks, make some definite announcements and would involve the banks.
“We do have a very clear roadmap in the country and as I said, we’ve been exploring the various technology options, engaging various industry players and we are about to move to the next stage of a proof of concept after we will start the piloting.
She said there are, however other considerations, like the architecture, accessibility, privacy, asset tokenisation, and ratification.
Other issues discussed at the bankers committee include the launch of digital cards, as well as foreign exchange availability in banks.
The banks Chief executives who briefed the media on the outcome of the bankers committee include, Herbart Wgwe, group managing director/CEO, Access Bank Plc, Patrick Akinwuntan, managing director/CEO, Ecobank Nigeria, Nneka Onyeali-Ikpe, managing director/CEO, Fidelity Bank, Abubakar Suleiman, managing director/CEO, Sterling Bank Plc, Haruna Mustafa, director, banking supervision, CBN and Osita Nwalisobi, acting director, corporate communication department.
On foreign exchange, Nneka Onyeali-Ikpe, noted the CBN’s instruction to all banks to make sure there is availability of FX at all times for anybody who want to buy Business Travel Allowance (BTA), Personal Travel Allowance (PTA), medical fees, student school fees and all the eligible invisible purchases, to ensure that Nigerians are not forced to go and use the parallel market.
“What we have been instructed to do is to ensure that we do not turn anybody back and that we should request from the CBN once we exhaust the stock we have. So this very good news and the idea is to have a hitch-free summer period and resumption of schools for children to go back to school. So the idea is to ensure that there is less pressure on the FX and then the rates will come down,” she said.
Throwing more light on this, Wigwe said the committee highlighted the need for banks to support SMEs who import small raw materials to set-up their businesses.
Wigwe, who spoke on domestic cards scheme said the committee discussed on how to ensure that all cards schemes will be registered locally and the whole idea is that if the cards scheme is registered locally, payment will emanate locally and it would enhance efficiency of the local payment system.
“It would also minimise significant sums of money that banks and other institutions pay when you use foreign cards, therefore helping to conserve the foreign currency that we have or at least even manage it,” Wigwe said, adding that a local company would be set-up in that regard and that way the overall efficiency of the local system will be enhanced.