Nigeria and Ghana are racing to adopt a central bank digital currency as they look to ride the wave of popularity of cryptocurrencies in West Africa’s two largest economies. Central banks in both countries have partnered with foreign financial tech companies to create digital versions of their currencies, joining the global train of countries exploring the initiative.
Nigeria, Africa’s largest economy, will launch its eNaira digital currency on October 1, while Ghana will trial e-Cedi from this month.
Nigeria has seen a boom of cryptocurrencies, despite a ban on banks making the transactions, as people look for ways to escape the weakening naira currency and offset high cost of living and unemployment in Africa’s most populous country.
“Nigerians are investing in cryptocurrency as a means of store value and to carry their funds outside the shores of the country,” said Ayodeji Ebo, head of retail investment at Lagos-based investment firm Chapel Hill Denham.
“eNaira will be for transactionary purposes.”
Central banks across the world are exploring ways to create virtual money as legal tender following the growth in digital payments, cryptocurrency and privately issued stablecoins.
Both so-called central bank-backed CBDCs and cryptocurrency are virtual money: CBDCs are issued and regulated by the central bank while the other is out of government control.
China became the first major economy to pilot a digital currency last year. Since then, five countries have launched digitised currencies, according to a CBDC tracker by American think-tank Atlantic Council.
Although some African countries such as Kenya, South Africa and Rwanda are exploring CBDCs, Nigeria and Ghana have already reached advanced stages.
Step by step
The Bank of Ghana is partnering with German firm Giesecke+Devrient (G+D) to pilot the e-Cedi. The scheme is part of a broader plan to digitise the country and its government.
G+D will provide the technology that will be tested in a trial phase with local banks, payment service providers, consumers and others.
Nigeria selected global financial technology company Bitt Inc. for its CBDC launch known as “Project Giant” after more than three years of research into the digital currency.
“The CBN will rely on the company’s tested and proven digital currency experience, which is already in circulation in several eastern Caribbean countries,” the Central Bank of Nigeria said.
The new eNaira will be issued by the CBN as legal tender like the current naira currency and will operate on the Hyperledger Fabric Blockchain. It will also follow the official exchange rate.
Starting from October 1, customers will be able to download the eNaira app and fund their mobile wallets using their existing bank accounts, according to CBN governor Godwin Emefiele.