New research by Enhancing Financial Innovation & Access (EFInA) finds that blockchain technology can address barriers to financial inclusion in Nigeria and substantially boost Nigeria’s economy, potentially adding $29 billion to Nigeria’s GDP in this decade. The report, titled ‘Potential of Blockchain for Financial Inclusion in Nigeria,’ outlines the potential of blockchain to drive financial inclusion and illustrates potential use cases of blockchain technology in Nigeria.
Driving financial inclusion in Nigeria has been highlighted by the Central Bank of Nigeria (CBN) as a key objective. However, EFInA’s 2020 Access to Financial Services in Nigeria Survey highlighted that financial inclusion in Nigeria stands at 64%, falling short of the National Financial Inclusion Strategy of achieving 80% financial inclusion by 2020. The EFInA blockchain study highlights that blockchain-enabled solutions can support progress towards the Nigeria’s financial inclusion targets and address some of the key challenges around financial inclusion such as lack of formal ID, high transaction charges, and lack of transparency.
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Blockchain technology has the potential to revolutionise the Nigerian economy. According to EFInA’s research, it can increase Nigeria’s GDP by $29 billion by 2030, mainly by instilling trust in business, government transactions, and processes. EFInA identified four key use cases of blockchain technology in Nigeria – Enabling Identity Management, Payments, Access to Finance, and Land Titling & Registration – outside of cryptocurrency, which is a major application of blockchain technology and a recurring topic of discussion amongst regulators and government entities around the world today.
Circulars recently released by CBN and SEC on cryptocurrency speak to the fact that blockchain technology is on Nigerian policy makers’ radar. Cryptocurrencies fall into different categories – speculative coins, stable coins, and central bank digital currencies – which have varying opportunities and degrees of risk. The Central Bank of Nigeria has recently announced plans to launch a Central Bank Digital Currency, which has the potential to support governmental intervention schemes for those in underserved areas and enable efficiency in cross-border remittances.
To ensure that the potential of cryptocurrency and blockchain technology is realised in Nigeria, a collaborative effort among multiple stakeholder groups is essential – Regulators, Financial Service Providers, Development Institutions, and Donors /Financial Sector Development organizations. These stakeholder groups must find ways to communicate and collaborate to spur innovation-friendly policies and ensure we take a risk-balanced approach in implementing emerging technology in Nigeria.
Other countries have leveraged public-private partnerships and adopted blockchain technology to drive inclusion and efficiency in their financial systems. For instance, the South African Reserve Bank, in collaboration with ConsenSys (a fintech) and the national banking community, leveraged blockchain to reduce transaction processing time by 75% while increasing trust, confidentiality, and scalability in their financial system.
The Nigerian financial ecosystem must take learnings from other climes and find ways to apply them locally to improve how we transact with one another and enable inclusion for Nigeria’s most vulnerable groups.
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