Central and federal reserve banks around the world are testing schemes to incorporate the latest technology into their financial systems, including in the issuance and control of fiat. The search for a faster, cheaper and more secure payment solution is high on the global agenda. Digital assets, tokenization, and digital identity powered by a form of distributed ledger technology (DLT) have become global trends.

The Central Bank of Nigeria reveals the objectives of its digital payments system

The Central Bank of Nigeria (CBN) has published a document outlining its strategy and roadmap for an improved payment system. The CBN calls these strategies and roadmaps the Payment System Vision (PSV). In 2006, the CBN launched Payment System Vision 2020 (PSV 2020): its strategy and roadmap for what Nigeria’s digital payment system should be by the year 2020. PSV 2020 facilitated the emergence of a robust payments infrastructure in Nigeria and a great digital reform. in the Nigerian banking sector. By 2021, Nigeria’s real-time payment transactions ranked 6th in the world and was rated the most developed real-time payment scheme in Africa. Nigeria recorded 3.7 billion real-time transactions in 2021. Nigeria’s robust real-time payment system NIBSS Instant Payments (NIP), launched in 2011, is supported by all neo and commercial banks in the country. The payment system can be accessed through a wide range of channels including Internet and mobile banking, ATMs, POS and USSD terminals.

In a bid to expand its payment channels, the CBN launched its central bank digital currency (CBDC) called e-naira in October 2021. CBN’s updated PSV 2025 payment systems roadmap focuses on the development of a payment system powered by contactless payments, big data, and distributed ledger technology (DLT), among others.

With the success registered at home with its digital payments system, the CBN in its PSV 2025 roadmap aims to expand its payments system for cross-border use in real time to simplify and reduce the number of international transactions and open a direct channel for fast transfers and processing. of remittances

Drastic reduction of cash transactions

The CBN has tried to implement a cashless policy as quickly as possible. In December, the CBN announced that it would implement a cash withdrawal limit within the territory. The initial limit announced was 100,000 naira ($225) per week for individuals and 500,000 ($1,100) for corporate entities. However, following public outcry and a Senate hearing, the CBN revised and raised its cash withdrawal limit, setting new limits at 500,000 naira ($1,100 USD) for individuals and 5,000,000 naira ($11,000 USD). ) for corporate entities.

The CBN says the purpose of the cash-out limit is to drive adoption of digital payments and the use of its CDBC. eNaira.

eNaira adoption metrics

It has been over a year since CBN and the Nigerian federal government launched their retail CBDC eNaira. The government chose the slogan “same naira, more possibilities” for eNaira. The eNaira has been plagued by slow adoption and poor usability.

According to surveys, only 1 in 200 Nigerians use eNaira. At the 2022 eNaira Hackathon, CBN Governor Godwin Emeifile expressed optimism about the eNaira project. He revealed that the official eNaira wallet had reached 840,000 downloads and the total transaction volume had reached approximately $9 million.

This statistic, however, has been viewed as impressive by many, as Nigeria is known as one of the largest peer-to-peer (p2p) cryptocurrency merchants in the world. In the first half of 2022, Nigeria’s total p2p BTC volume reached almost $400 million; while its volume of p2p loans reaches approximately $8 million weekly. An online survey by a data analytics platform found that in 2020 32% of Nigerians owned cryptocurrency; while in 2022, the cryptocurrency ownership rate in Nigeria increased to 45%. Compared to the statistics Revealed by the CBN Governor, eNaira is far from seeing reasonable adoption in the country. This raises the question: Will CBDC ever win the trust of users and outperform decentralized systems like Bitcoin?

In other parts of the continent, various central and reserve banks have been exploring CDBCs. The Bank of Ghana has also started the pilot phase of its retail CBDC. In South Africa, Zambia, and Ghana, there have also been some CBDC developments.

As these governments and their central banks continue to build the frameworks and building blocks of DLT-powered systems, the real paradigm shift in how money is sent, received, retrieved, and stored is yet to come. around the corner.