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Nigerians are Trading Depreciating Naira for Bitcoin

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Nigerian Naira
Image Credit: Andi T23 (Flickr)

The looming financial crisis slamming the Nigerian economy appears to worsen as time passes. The Nigerian naira continues to depreciate significantly. A financial projection by Goldman Sachs predicts the devaluation of the naira to about ₦550 per dollar within the next 12 to 18 months. Disturbing financial projections like this, and other unfavorable financial conditions that toll Nigeria’s economy, leave Nigerians with the burden of finding a better alternative currency to store their wealth. 

The rise of digital currencies, particularly Bitcoin, has presented Nigerians with an alternative to the depreciating naira. Digital currencies, like the bitcoin and BUS, the digital dollar backed by Binance, protect the wealth of Nigerians from the financial storms that hit the nation. While others who store their value in naira inevitably experience great loss, those who trade the naira for Bitcoin and the stablecoin BUSD currently offered on Bundle Africa, see a significant push in their wealth. Bitcoin is a digital currency which is built with blockchain technology and allows users to exchange funds and transact directly via peer-to-peer networks which do not require middlemen.

Although the introduction of digital currencies in Nigeria was received with mixed sentiments due to its perception as a Ponzi scheme, quite a lot have changed since then. The use of Bitcoin has gained a significant surge over the years. In terms of global search volumes for bitcoin over the past twelve months, recent statistics by Google trends ranks Nigeria as the top country. This indicates the massive interest of Nigerians in Bitcoin. 

Many Nigerians prefer holding Digital currency like Bitcoin and BUSD compared to the country’s fiat – Nigerian Naira

With the prevalence of blockchain in Nigeria, Nigerians can now perform day-to-day transactions more conveniently via Bitcoin. Additionally, with Bitcoin, international payments and transactions occur much faster. The several benefits of transacting with digital currencies, in preference to the naira, has led to the widespread usage of digital currencies in Nigeria. Several Nigerians see no rationale behind storing their value in naira, considering the harsh economic conditions, when digital currencies exist. The chart below shows the result of a 2020 Statista Global Consumer Survey that was carried out to determine the extent of the usage of cryptocurrencies in 65 selected countries. Nigeria tops the list with about 32 percent of the Nigerian respondents in the survey confirming that they used or owned cryptocurrencies. 

Image Credit: Statista

The engagement of Nigerians in the transaction of cryptocurrencies, relative to other nations, has undoubtedly been overwhelming. In statistics provided by Usefultulips, a BTC analytic provider, for Q2 2020, Nigeria topped in the amount of BTC transactions in Africa, with over $34.4 million. South Africa, the closest rival, transacted a total value of about $15.2 million, less than half of Nigeria’s transactional value.

The significant interest of Nigerians in digital currencies has attracted the attention of several prominent players in the global business and cryptocurrency scene. “Sad to be leaving the continent…for now. Africa will define the future (especially the bitcoin one!). Not sure where yet, but I’ll be living here for 3-6 months mid 2020. Grateful I was able to experience a small part. 🌍, ” remarks Jack Dorsey, CEO of Twitter and Square, stated, via a twitter post, after his visit to Nigeria in 2019. Unfortunately Jack’s proposed move to Africa was disrupted by the Covid-19 Pandemic.

With the current state of digital currencies in Nigeria, there is a lot of potential for an increased massive engagement in Bitcoin and other digital currencies. Quite a number of Nigerians are flocking towards digital currencies and it will only take a while for the constant depreciation of the naira and the dwindling financial economy of Nigeria to push others to adopt the use of digital currencies as a substitute for the naira.

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Nigeria’s Central Bank Digital Currency e-Naira Gain Traction

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eNaira

According to Governor Godwin Emefiele, the Central Bank of Nigeria’s (CBN) digital currency, the eNaira, which was officially revealed on Monday, has garnered immense interest and a positive response from both within and beyond Nigeria, with 33 banks fully integrated on the platform. The CBN has successfully minted $500 million, with N200 million going to financial institutions, according to Emefiele, who spoke at President Buhari’s historic launch in Abuja.

In addition, over 2,000 clients have been added to the eNaira platform, and over 120 merchants have successfully enrolled. Since its launch, the eNaira website has had approximately 2.5 million daily views. Customers who download the eNaira Speed Wallet App will be able to complete the onboarding process and build their wallet, locate their eNaira wallet from their bank account, transfer eNaira from one wallet to another, and make payments at registered merchant locations.

In terms of maintaining a robust payment system, the Central Bank of Nigeria (CBN) feels that the eNaira will make a big difference to Nigeria and Nigerians. The eNaira will also lower the cost of processing currency, allowing for more direct and transparent welfare interventions for citizens, as well as increased revenue and tax collection, easier diaspora remittances, lower the cost of financial transactions, and improved payment efficiency.

Governor Godwin Emefiele outlined these advantages during the historic debut in Abuja, saying that Nigeria’s Central Bank Digital Currency (CBDC) is the first in Africa and a digital version of the actual Naira. 

What is eNaira?

The eNaira is the same Naira with considerably more possibilities, Emefiele asserted emphatically, guaranteeing that the new payment system is one of the most robust in the world, sufficiently safeguarded, and thus nothing to worry about.

In 2017, the Central Bank of Nigeria (CBN) began an intensive study, consultations, identification of use cases, and testing of the CBDC idea in a Sandbox environment, in response to increased interest in Central Bank Digital Currency (CBDC) around the world.

The goal of the study was to provide a strong argument for the introduction of a digital currency in Nigeria so that all Nigerians can benefit from a more successful and inclusive economy.

Following the completion of preliminary research, the CBN’s researchers and experts were able to clearly establish that a digital currency will promote a more paperless, inclusive, and digital economy, complementing the successes of prior policy initiatives and our rapidly increasing payment systems.

As a result, the CBN decided to create its own CBDC, dubbed the eNaira. Like the physical Naira – eNaira is a legal tender in Nigeria and a liability of the CBN, which will have the same value and always be exchanged at 1 naira to 1 eNaira

To reduce the risk of the process, the CBN has carefully considered the entire payments and financial architecture, and has structured the eNaira to complement and improve these ecosystems, as well as implementing security protections and policies to ensure the financial system’s integrity.

To maintain the integrity and stability of Nigeria’s payment system, strict adherence to anti-money laundering and counter-terrorist financing regulations would be enforced, according to Emefiele.

The eNaira, like other digital revolutions, is a journey, and Nigerians should expect more features in the coming months. Accessibility and onboarding of consumers without BVN, as well as the usage of the eNaria on the phone without access to the internet, are among them. 

Nigeria will be one of the first countries in the world to implement the CBDC using USSD on phones, bypassing the need for internet access. The CBN also plans to use the eNaira platform to onboard revenue collection agencies in order to increase and simplify collections, as well as to create sector-specific tokens to support the Federal Government’s social programs and distribution of targeted welfare schemes in order to lift millions of people out of poverty by 2025.

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Jack Dorsey‘s Square to develop open source Bitcoin mining

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Jack Dorsey Bitcoin

On Friday, October 15, Twitter CEO Jack Dorsey announced that American fintech company, Square, would be looking to get into Bitcoin mining. Jack Dorsey who is also Square’s CEO announced this on Twitter which subsequently sent waves through the bitcoin market, surging its price to almost a record high, rising over $62,000 over the weekend. According to the Twitter boss, Square is looking to building an open source Bitcoin mining system that would be available to individuals and businesses.

Sharing his thoughts further on the initiative, he stated that “Mining needs to be more distributed” and that “the more decentralized [mining] is, the more resilient the Bitcoin network becomes. He also mentioned the apparent inaccessibility of mining stating that “Bitcoin mining should be as easy as plugging a rig into a power source.

Dorsey also believes that bitcoin mining “needs to be more efficient and that “clean and efficient energy use” would be undoubtedly beneficial to the digital currency in the long run.

Dorsey ended the thread by saying that a “technical investigation would be undertaken by a Square team led by Jesse Dorogusker, Square’s hardware lead. If successful, this initiative would be another of Square’s bitcoin focused projects which includes a Bitcoin hardware wallet.

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Financial Leaders from G7 Release Guidelines for Central Bank Digital Currency

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Source: World Atlas

At a meeting that was held in Washington, yesterday, October 13, G7 leaders discussed central bank digital currency and endorsed 13 public policy principles with regards to their implementation. The financial leaders from G7 agreed that CBDCs would complement cash and should not be detrimental to the monetary system. The G7 leaders have been discussing CBDCs this week concluding that they should do no harm and meet rigorous standards.

It should be noted that G7 includes finance leaders in advanced economic nations comprising of Canada, France, Germany, Italy, Japan, the U.S and the U.K. the G7 leaders make it mandatory that any newly launched CBDC should not harm the central bank’s ability to perform its duty of maintaining financial stability. In a joint statement by the G7 finance ministers and central bankers, they said that, 

“Strong international coordination and cooperation on these issues help to ensure that public and private sector innovation will deliver domestic and cross-border benefits while being safe for users and the wider financial system.” 

The joint statement further states that CBDCs are complements to cash and could serve as a liquid or safe settlement assets with an added advantage of anchoring existing payment systems. CBDCs issuance should be entrenched in a long-standing public commitment to transparency, rule of law, and sound economic governance. The statement added at CBDCs must be so efficient that they are fully interoperable on a cross-border basis. 

The G7 leaders agreed that they had a duty to minimize the incidence of ‘harmful spillovers to the international monetary and financial system” 

The G7 statement reiterated a similar statement earlier made by G20 that no global stablecoin project should begin operation until such a token has addressed legal, regulatory and oversight requirements. 

Countries like China and Nigeria are ahead of the pack with regards to the adoption of digital Yuan and Naira respectively. China’s crackdown on cryptocurrency may be a step forward for the country’s plan to promote its digital Yuan. Nigeria, on the other hand, postponed the launch of its eNaira in deference to the 61st anniversary of Nigerian independence on Oct 1. 

However, countries like the US and the UK are dragging their foot with regards to the introduction of CBDCs to their financial system. There are insinuations that America is in danger of being left behind technologically and financially if it doesn’t get serious with the implementation of CBDC in its financial system.

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