The Central Bank of Nigeria has constantly been in the news recently, with its influence becoming more overbearing – from its decision to freeze the accounts of some startups in the name of stopping speculation and protecting the naira, to the decision to stop allocating USD to BDC operators, yet in its wisdom allowing a complex nation like Nigeria to have multiple exchange rates.
The whole thing has become one huge circus. I am not an economist but I know one thing for certain, allowing multiple exchange rates simply leaves room for fraud; the banks are not manned by angels.
Anyway, my focus today is CBN’s e-Naira project.
The tech ecosystem is surely looking forward to October 1st when our ‘all-wise’ CBN will be launching what it believes would check the continuous rise of the crypto pundits in the country.
I must say that the idea of CBN moving in to quickly launch its own Central Bank Digital Currency ahead of the majority of global central banks is somewhat daring and laudable.
However, I wonder whether this was well thought through or just a policy designed and announced in a rush simply because of the threats posed by cryptocurrencies.
In recent times, central banks across the world appear to have taken a soft pedal on 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 Central Bank Digital Currencies. As cryptocurrencies threaten traditional financial institutions according to central banks, their respective governments needed to create a look-alike alternative to cryptocurrency usage.
Irrespective of my opinion, the e-Naira would likely become a reality in the next few weeks. Although the modalities of how this currency would function aren’t very clear at this time because I wonder whether the CBN has fully considered issues around what blockchain infrastructure it intends to deploy and how privacy would be guaranteed.
According to Rukayat Mohammed, the Director of Information Technology at the CBN, the apex bank has been exploring the possibility of CBDC for more than two years.
Going further, she said, “Eighty per cent of central banks around the world have been exploring cryptocurrency and Nigeria can’t be left out of the equation.”
The CBN has gone ahead to name Friday, October 1, 2021, as its launch date for the e-Naira and also taken a further step by selecting a Barbados-based fintech firm, Bitt Inc. as its technical partner in developing its CBDC.
In all these, there have been questions around the CBN’s choice of Bitt Inc. as its technical partner. However, a closer look at InterStellar, the company that came second in the bid shows that it understands Africa better and most importantly, is the organisation behind Bantu, a public blockchain infrastructure, which is the first of its kind on the continent.
The selection of Bitt only came shortly after the CBN released draft guidelines for the e-Naira, and further down the line, the apex bank’s Director of Communications, Osita Nwanisobi, had hinted on why the Barbados-based fintech firm was the choice. According to him, Bitt is ‘tested and proven digital currency experience’.
In what appears to be corroboration to Nwanisobi’s claim, the Barbados-based fintech firm website suggests that the company had conducted a similar CDBC project for the Eastern Caribbean Central Bank and it was successful as the ECCB launched its digital currency, Dcash.
This move by the CBN is yet another step by the country in relegating indigenous or African solutions. If Nigeria as a country continues to campaign for the localisation of its technology through its various government agencies, why then did the apex bank take this step that pitches Nigeria in the opposite camp?
Nigeria as a country is filled with an abundance of expertise and working capacity to develop its CBDC. However, the continued snubbing of the country’s local technology calls for concerns.
Reports also have it that the contract between Bitt and CBN may have fallen short of some standard as required by law. The contract signed between the CBN and the Barbados-based fintech company is bound to meet strict compliance to IT procurement processes.
Projects like this, according to reports, require any government ministry, agency or department to seek clearance from the National Information Technology Development Agency before commencing as the agency is supposed to be the clearing institution for Nigeria’s IT procurement.
This is based on Section 6 of the NITDA Act, 2007. If this report is anything to go by, then it is an indication that the CBN is an institution that isn’t law-abiding.
A retrospective analysis of the CBN’s move
CBN’s announcement dates back to Monday, August 30, 2021, when it hinged the choice of Bitt on efficiency, competence, security, interoperability and implementation experience. There is an inconsistency that may pose a danger to the project.
The total population of the Eastern Caribbean Currency Union is 634,393 people, a figure not up to any state in Nigeria. So the question here is, how can the aforementioned number be tied to an implementation experience?
Anywhere across the world, the advent of digital currency is like a new kid on the block. Therefore, there is no propriety technology that has proven a long time experience in this case.
Allowing the implementation of this project by a local fintech company wouldn’t have been just about growth but development for how far the country has gone.
Wasn’t Remita deployed for Treasury Single Account? Has it not been a success story? Obviously, it has. The Nigerian government trusted that this indigenous solution would help curb financial misappropriation and to a large extent, it has.
So why couldn’t the CBN give them the same path in the case of the e-Naira? With the continuous rise of the fintech landscape in Nigeria and success recorded on the continent and beyond, the government of the day should be focused on the general development of the country, both societal and human.
ICT Clinic by CFA is published weekly in the Sunday Punch