The Central Bank of Nigeria has been in constant headlines lately, with its influence becoming more dominant – from its decision to freeze the accounts of certain startups in the name of stopping speculation and protecting the naira , the decision to stop allocating dollars to BDC. operators, but in its wisdom allowing a complex nation like Nigeria to have multiple exchange rates.
The whole has become a huge circus. I am not an economist but I know one thing for sure, allowing multiple exchange rates simply leaves room for fraud; banks are not run by angels.
Anyway, my focus today is on CBN’s e-Naira project.
The tech ecosystem is surely eagerly awaiting October 1, when our “wise man” CBN will launch what it believes would curb the continued rise of crypto experts in the country.
I have to say that the idea of the CBN quickly launching its own central bank digital currency before the majority of the world’s central banks is somewhat bold and laudable.
However, I wonder if this was well thought out or just a policy hastily designed and announced simply because of the threats posed by cryptocurrencies.
In recent times, central banks around the world seem to have softened their “campaign” against non-fiat currencies. The idea is, “If we can’t beat them, we join them.
However, in this case, central banks are not going for cryptocurrencies but for digital currencies of central banks. As cryptocurrencies threaten traditional financial institutions according to central banks, their respective governments needed to create a similar alternative to using cryptocurrency.
Regardless of my opinion, the e-Naira would likely become a reality within the next few weeks. Although the modalities of operation of this currency are not very clear at the moment, because I wonder if the CBN has fully taken into account the issues relating to the blockchain infrastructure it intends to deploy and how the confidentiality would be guaranteed.
According to Rukayat Mohammed, director of information technology at CBN, the umbrella bank has been exploring the possibility of a CBDC for more than two years.
Going further, she said, “80% of central banks around the world have explored cryptocurrency and Nigeria cannot be left out of the equation. ”
The CBN has decided to designate Friday, October 1, 2021 as the launch date for the e-Naira and has also taken a step further by selecting a Barbados-based fintech company, Bitt Inc. as a technical partner for the development of its CBDC.
In all of this, there have been questions surrounding Bitt Inc.’s choice of CBN as a technical partner. However, a closer look at InterStellar, the company that finished second in the offering, shows that it has a better understanding of Africa and, most importantly, is the organization behind Bantu, a public blockchain infrastructure, which is the first of its kind on the continent.
Bitt’s selection came only shortly after the CBN released draft guidelines for the e-Naira, and later the umbrella bank’s communications director Osita Nwanisobi hinted why the Barbados-based fintech company was the choice. According to him, Bitt is “a tried and tested digital currency experience.”
In what appears to corroborate Nwanisobi’s claim, the website of the Barbados-based financial technology firm suggests that the firm had carried out a similar CDBC project for the Eastern Caribbean Central Bank and that it was successful when the ECCB launched its digital currency, Dcash.
This CBN initiative is a new step for the country in the relegation of indigenous or African solutions. If Nigeria as a country continues to campaign for the localization of its technology through its various government agencies, then why has the apex bank taken this step which puts Nigeria in the opposite camp?
Nigeria, as a country, is full of expertise and working capacity to develop its CBDC. However, the country’s continued local tech snob is cause for concern.
Reports also indicate that the contract between Bitt and CBN may fall short of certain standards required by law. The contract signed between CBN and the Barbados-based fintech company is bound to strictly adhere to IT procurement processes.
Projects like this, according to reports, require any government ministry, agency or department to seek permission from the National Information Technology Development Agency before starting, as the agency is supposed to be the clearing institution for computer purchases in Nigeria.
This is based on section 6 of the NITDA, 2007. If this report is anything, then it is an indication that the CBN is a law-breaking institution.
A retrospective analysis of the CBN move
CBN’s announcement dates back to Monday, August 30, 2021, when it articulated Bitt’s choice of efficiency, competence, safety, interoperability and implementation experience. There is an inconsistency which can constitute a danger for the project.
The total population of the Eastern Caribbean Monetary Union is 634,393 people, a figure that does not match any state in Nigeria. So the question here is how can the aforementioned number relate to implementation experience?
Around the world, the advent of digital currency is like a new kid. Therefore, there is no proprietary technology that has proven long experience in this case.
Allowing the implementation of this project by a local FinTech company would not have been only a matter of growth but of development for the road traveled by the country.
Wasn’t Remita deployed for the Treasury single account? Was it not a success? Obviously he has. The Nigerian government was convinced that this indigenous solution would help curb financial embezzlement and, to a large extent, it has done so.
So why couldn’t the CBN give them the same path in the case of the e-Naira? With the continued rise of the fintech landscape in Nigeria and the successes recorded on the continent and beyond, the current government should focus on the overall development of the country, both societal and human.
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