IMF Believes Nigerian CBDC is “Laudable,” But Needs Improvement
- The International Monetary Fund (IMF) stated that the Nigerian CBDC, eNaira, is “laudable” but needs some improvement.
- During the study’s time span, 1.5% of the total wallets remained active, and only 802,000 transactions have been initiated.
- Less than 1 transaction is initiated per wallet, with less than 1% of bank accounts having wallets, stated the UN agency.
- The IMF said that eNaira can act as a bridge between MMOs and customers or compete with MMOs in the retail market.
The International Monetary Fund (IMF), the financial agency of the United Nations headquartered in Washington, DC, has been skeptical of cryptocurrencies and their widespread adoption across various nations, including El Salvador, the first country to adopt Bitcoin (BTC) as legal tender in September 2021. The agency recently released its report on eNaira, the official central bank digital currency of Nigeria, calling it “laudable.” However, the agency believes that CBDC needs improvements in order to reach the masses.
As per the IMF report released earlier this week, the retail side of the Nigerian CBDC, which is close to being one-year old and is the world’s second CBDC after the Bahamian Sand Dollar, is intermediated, but has no problems with latency. The agency claims that the CBDC needs to expand beyond its initial adopters.
The IMF researchers stated that the Central Bank of Nigeria introduced eNaira in a phased manner, which resulted in putting off two of the biggest goals of the CBDC, i.e., to extend financial inclusion to the unbanked and facilitate remittances. Furthermore, the UN agency added that around 1.5% of the total number of registered wallets are active each week, and during the time span examined, only 802,000 transactions were initiated.
This number of transactions confirms that less than one transaction is being initiated per wallet, and it is important to note that less than 1% of bank accounts in the country have wallets.
“Like any network products with similar traits (e.g., credit card), breaking the initial low adoption equilibrium requires mix of clever strategies and luck,” said the paper.
The IMF noted that, more importantly, mobile money operators (MMOs) have a huge network in Nigeria, and a key question raised in the paper was eNaira’s relationship with these MMOs. There are two paths that the eNaira can follow: act as a bridge between MMOs and customers or compete with the operators in the retail market.
The paper stated that it is possible for eNaira to act as a bridge, but, it’s “hard to imagine” that the CBDC can replace these MMOs.
The IMF also noted that, being a single-currency system, the eNaira is unable to accommodate remittances directly. However, the agency noted that this could be overcome either by allowing international money transfer operators to receive eNaira wallets or through intermediation. The agency recommended the former while adding that both of these options would be expensive.
The International Monetary Fund wants more crypto regulation in Africa as the crypto market in the region grew by more than 1,200% between July 2020 and June 2021, according to Chainalysis. Following the bankruptcy of crypto exchange FTX in November last year, the agency believes that regulation of crypto in the region is a necessity.
As reported earlier by BitcoinWisdom, the Financial Stability Board, the IMF, and the Bank for International Settlements announced their collaboration to release regulatory framework guidelines later this year. These agencies have prioritized the regulation of the crypto industry and would consider a total ban if certain conditions are not met.
The IMF managing director, Kristalina Georgieva, added that “if the regulation is slow to come and crypto assets become a higher risk for consumers and have the potential for financial stability,” banning cryptocurrencies “should not be taken off the table.”
A crypto journalist with over 3 years of experience in DeFi, NFT, metaverse, etc. Parth has worked with major media outlets in the crypto and finance world and has gained experience and expertise in crypto culture after surviving bear and bull markets over the years.
