With over $24.3 billion in diaspora remittances to Nigeria and 43 percent of the country’s population financially excluded, prospects for Facebook’s Libra Crypto-currency to thrive in the market seems doubtless, as it aims to significantly decrease the current seven percent foreign transaction fees, impact speed and safety of money transfers which may, in turn, spike up numbers of diaspora remittances by up to 50 per cent and bridge the financial inclusion gap which abounds in Africa.
Read Also: 6 things to know about Facebook’s cryptocurrency, Libra
Financial Technology experts and economists say that digital currencies and Blockchain technology which ensure maximum security, speed and cost less will create stable financial health for economic growth.
Libra is a permissioned Blockchain digital currency proposed by social media giant, Facebook. The project, platform and transactions are managed and securely enthrusted to the Libra Association, a membership organisation founded by Facebook subsidiary, Calibra and 27 others across payment, technology, telecommunication, venture capital, online market place and non-profits.
According to a World Bank report published last year, the cost of sending cash in sub-Saharan Africa was at least 20% higher than any other region in the world. The report revealed that sending $200 to and from the region in the first quarter of 2018 cost a whopping $19. The introduction and use of digital currencies will significantly reduce and may, in the long run, eliminate these high financial transaction charges.
Although there has been some pushback from countries such as Nigeria, Zimbabwe, Ethiopia, Kenya and even India, which are said to have created laws prohibiting the use of the highly unregulated crypto-currencies, the Libra Association has clearly distinguished the coin from the popular Bitcoin and says it is currently in talks with Central Banks in some African countries on granting of licenses in preparation for the launch of Libra by the second half of 2020.
Speaking at a press roundtable at the Conduit Hotel in London on Tuesday, Betrand Perez, COO, Libra Association said: “Libra is not an investment or speculative asset, so when you buy a Libra coin, that will not grant you any right on returns. When you want to acquire coins, we would receive your currency e.g. Euros, and put them in the reserve in exchange for the Libra coins. So, the reserve will fill itself from the purchases of the coins, there is no monetary creation.
Clarifying thoughts that Libra could destabilise finance and undercut authority of central banks, Perez explained that “Libra also relies on all the currencies in its Fiat basket, in the sense that we are going to rely on monetary policies of those Central Banks, whether it’s the European Central Bank or the central banks of the other currencies, so basically, whatever they do on their side in terms of monetary policies would be reflected instantly in the basket and the price of the Libra coin. So the coin would be an image of the monetary policies of those Central Banks. We see it as a payment system.”
Fifty per cent of Facebook Libra’s basket will be on the us dollar, the remaining portion will consist of Euro with 18 per cent, Yen with 14 per cent, British Pound, 11 percent and the Singapore dollar with 7 per cent. Surprisingly, the basket will not include the Chinese Yuan, the currency of the world’s second-largest economy.
Responding to questions from BusinessDay on the proposed success rate of Libra currency in Africa, Betrand Perez said: “We see that there is a demand from customers in countries in Africa to use mobile money services because they bring a lot of value to them in terms of the ability to not only send and receive money but to store money in a much more secure way than using cash. And that’s really what we want to achieve with Libra is to have at scale (worldwide) a way for people to send, receive and save money securely simply with a mobile phone subscription.
“This is something that we feel is really important to bring because there are too many financially excluded people in this world and Libra can achieve the goal of solving a significant part of that gap. From the security perspective, some African countries including Nigeria are actively taking steps to enforce cashless policy because it is dangerous to carry huge amounts of cash around. This will also eliminate the cost of paying bank charges to save money,” he added.
Christina Smedley, VP, brand and marketing for Calibra, one of the 28 members of the association told BusinessDay that: “From what we have seen in Africa, a lot of money is being sent across border, which can’t be done using the Mpesa type model in Kenya, so we know that we would be able to adapt and help people transfer across borders particularly.”
Founding members need to invest a minimum of US $10 million in the Libra association. Wallets would be available on WhatsApp, Facebook messenger, all Facebook products and would be interruptible with other wallets so that other people building on the Blockchain would be linked.
The Association guarantees that data shared with Libra will not be shared with Facebook, and has already started sorting out regulatory processes in Switzerland.
Jumoke Akiyode-Lawanson, London
