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Central Bank of Nigeria

Nigerian Lenders Frustrating CBDC’s Adoption — Central Bank Governor

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Nigerian Lenders Frustrating CBDC’s Adoption — Central Bank Governor

Apathetic Nigerian lenders are frustrating the e-naira’s adoption because they are worried this could deprive them of a key revenue source, Godwin Emefiele, the Central Bank of Nigeria (CBN) governor, has said. Emefiele said the central bank is working on a channel that would enable Nigerians without bank accounts to open e-naira wallets.

E-Naira Undercuts Lenders’ Investment in Mobile Banking Infrastructure

The Nigerian central bank governor, Godwin Emefiele, has reportedly slammed some lenders he accuses of thwarting the adoption of the e-naira digital currency in the country. According to Emefiele, lenders are not prioritizing the promotion of the central bank’s digital currency because they fear this could deprive them of revenue earned from normal banking services.

Explaining the reasons behind the lenders’ reluctance, a Bloomberg report said e-naira transactions do not attract charges while the deposits are not regarded as cash in the lenders’ books. Further, the e-naira digital currency is said to undercut investments that lenders made in mobile banking services as part of their efforts to bolster fee and commission incomes.

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Lender ‘Apathy’

After describing the lenders’ unwillingness to promote the use of the central bank digital currency (CBDC) as an “apathy” Emefiele revealed the Central Bank of Nigeria is about to conclude tests on a channel that enables Nigerians without bank accounts to open e-naira wallets. The central bank is working with the mobile network operator MTN on this channel.

According to the CBN, since launching the digital currency in Q4 of 2021, only 700,000 e-naira wallets have been downloaded. Part of the reason for this is the fact that only account holders can open an e-naira wallet.

Meanwhile, following the central bank’s monetary policy committee meeting which ran for two days, the CBN reportedly resolved to increase the monetary policy rate (MPR) to 14%. Concerning the rate hike, Emefiele reportedly said:

If inflation continues to rise at this rate, we will continue to tighten [the] rate, but we are looking at other measures that will slow down inflation and food prices. But if that does not happen, we [MPC] cannot promise that rate hikes will stop.

The committee, however, resolved to “retain the asymmetric corridor at +100/-700 basis points around the MPR.” The liquidity ratio also is unchanged at 30%.

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Terence Zimwara

Terence Zimwara is a Zimbabwe award-winning journalist, author and writer. He has written extensively about the economic troubles of some African countries as well as how digital currencies can provide Africans with an escape route.

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Image Credits: Shutterstock, Pixabay, Wiki Commons, Shutterstock / mundissima

Disclaimer: This article is for informational purposes only. It is not a direct offer or solicitation of an offer to buy or sell, or a recommendation or endorsement of any products, services, or companies. Bitcoin.com does not provide investment, tax, legal, or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article.

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Alhaji Aminu Gwadabe

Nigerian Central Bank Told To Consider Floating The Naira, Recent Interest Rate Hike Slammed

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Nigerian Central Bank Told To Consider Floating The Naira, Recent Interest Rate Hike Slammed

The Central Bank of Nigeria should be discontinuing the fixed exchange rate system and let the naira freely float against the major currencies, Alhaji Aminu Gwadabe, the leader of a Nigerian association of bureau de change operators has said. The leader also slammed the recent adjustment of the central bank’s interest rate to 13%, which he said could have a negative impact on Nigeria’s underperforming economy.

Central Bank Told to Intervene to Save the Naira

The leader of a Nigerian association of bureau de change operators, Alhaji Aminu Gwadabe, has urged the country’s monetary authorities to consider allowing the local currency to freely float against the U.S. dollar. According to Gwadabe, doing this will help to prevent further depreciation of the naira.

In an interview with the News Agency of Nigeria, Gwadabe is also quoted advising the Central Bank of Nigeria (CBN) to consider intervening in foreign exchange markets. He reportedly said:

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CBN should contemporaneously undertake a large-scale dollar intervention in the open market that can inspire confidence in the Naira and checkmate the current tailspin. Once there is a significant positive movement, the market will react and, in all probability, spur an avalanche of panic selling and further buoy the Naira.

Gwadabe also reportedly said the CBN could still make a profit through a buyback of the dollars on the open market.

The comments by Gwadabe, whose organization’s members were previously accused of fueling the naira’s freefall on parallel forex markets, followed recent reports of the naira’s plunge and the CBN’s subsequent call on Nigerians to stop using the greenback for speculative purposes. With the latest plunge, the naira’s parallel market exchange rate of slightly over N700 for every dollar versus the official exchange rate of N424 implies the currency may be overvalued by nearly 70%.

Cashing Out Remittances in Dollars Exerts Pressure on Naira

Meanwhile, the News Agency of Nigeria report also quotes Gwadabe questioning the CBN’s decision to adjust the monetary policy rate (MPR) to 13% per annum. According to Gwadabe, the adjustment is likely to have a negative impact on Nigeria’s underperforming economy.

“Increasing the MPR contracts the supply side, it is the wrong prescription. Let’s not copy the Americans who target inflation with FED rates to curb money supply; their factors of production have been fully mobilized, ours is at less than 20 per cent and requires stimulation of the supply side,” Gwadabe is quoted explaining.

Instead of hiking the rate, Gwadabe recommended cutting the rate to 5% which he said “looks more appropriate.”

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Concerning the CBN’s decision to allow recipients of remittances to cash out in dollars, Gwadabe claimed this “fuels currency substitution.” Besides exerting more pressure on the exchange rate and inflation, this central bank policy “does not have a statutory backing unlike domiciliary accounts, therefore, it is illegal.”

Gwadabe also claimed that the solution to Nigeria’s currency woes “has to be psychological too” because the current “panic buying is driven more by psychology and less by economic fundamentals.”

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What are your thoughts on this story? Let us know what you think in the comments section below.

Terence Zimwara

Terence Zimwara is a Zimbabwe award-winning journalist, author and writer. He has written extensively about the economic troubles of some African countries as well as how digital currencies can provide Africans with an escape route.

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Image Credits: Shutterstock, Pixabay, Wiki Commons

Disclaimer: This article is for informational purposes only. It is not a direct offer or solicitation of an offer to buy or sell, or a recommendation or endorsement of any products, services, or companies. Bitcoin.com does not provide investment, tax, legal, or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article.

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Nigerian Central Bank Governor Says Fintechs And Cryptos Change The Way Financial Systems Function

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Nigerian Central Bank Governor Says Fintechs And Cryptos Change The Way Financial Systems Function

The Nigerian central bank governor and bitcoin critic, Godwin Emefiele, recently remarked that the rise of fintechs and cryptocurrencies among other technologies have forced banks and financial institutions to change the way they operate. According to Emefiele, this requires the central bank’s monetary policy committee (MPC) to rethink the way it regulates the financial system.

Rethinking Financial System Regulation

The governor of the Central Bank of Nigeria (CBN) Godwin Emefiele, reportedly said the MPC, which was set to meet on July 18 and 19, must chart a new path that changes the direction of Nigeria’s monetary policy.

Speaking at a so-called MPC retreat, Emefiele said new technologies and innovations were playing an important role in the development of Nigeria therefore the MPC’s decisions going forward must seek to enhance the contributions of these technologies.

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Further, in his remarks published by Daily Nigerian, Emefiele — a bitcoin critic — argued that fintechs and cryptos have changed the way the financial system functions and this calls for a rethink. He said:

The evolution of fintechs, cryptocurrencies, digital payments, artificial intelligence and machine learning, have changed the functioning of the financial and banking sectors, both globally and domestically. Therefore, the urgent call for the need to rethink financial system regulation, supervision and monetary policy implementation.

Although new technologies and innovations are often associated with risks and uncertainties, Emefiele insisted that these also come with several benefits that include better access to financial services, poverty reduction, and employment creation.

Staying Relevant in a Changing World

Meanwhile, the Daily Nigerian report also quotes the CBN governor urging members of MPC to acquaint themselves with monetary policy tools and objectives that are relevant to a digitized world.

“In order to ensure the relevance of monetary policy and the role of monetary authorities in the new digital world, MPC members must embrace themselves with [an] advanced level understanding of the interplay of digitalization with monetary policy objectives, targets and tools,” Emefiele reportedly said.

Concerning the MPC retreat, Emefiele said this was an important event because it gives the central bank an opportunity to assess its performance in the last three to four years.

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What are your thoughts on this story? Let us know what you think in the comments section below.

Terence Zimwara

Terence Zimwara is a Zimbabwe award-winning journalist, author and writer. He has written extensively about the economic troubles of some African countries as well as how digital currencies can provide Africans with an escape route.

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Image Credits: Shutterstock, Pixabay, Wiki Commons

Disclaimer: This article is for informational purposes only. It is not a direct offer or solicitation of an offer to buy or sell, or a recommendation or endorsement of any products, services, or companies. Bitcoin.com does not provide investment, tax, legal, or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article.

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Central Bank of Nigeria

Report: Nigerian Central Bank Incentive Scheme Failed To Halt Naira Depreciation

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Report: Nigerian Central Bank Incentive Scheme Failed To Halt Naira Depreciation

The Central Bank of Nigeria (CBN)’s attempt to incentivize the country’s forex market through the so-called “Naira for Dollar” scheme has failed. This is evidenced by the local currency’s plunge of more than 25% since the launch of the incentive scheme in March 2021.

Naira Depreciation

The CBN’s scheme that encourages recipients of cross-border remittances to cash out via formal channels failed to incentivize the forex market and has therefore not achieved the bank’s goal of halting the naira’s depreciation, a report has said.

According to one report in a local news site, Blueprint, since the launch of the Naira for Dollar scheme more than 13 months ago, the naira’s exchange rate versus the U.S. dollar fell by more than 25%. At the time of writing, the naira-to-dollar exchange on the parallel market is 612 naira for every dollar. The official exchange rate has remained at 415 naira for every dollar.

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As previously reported by Bitcoin.com News, the CBN launched the incentive scheme more than a month after it directed financial institutions to block crypto entities from the banking ecosystem.

At the time, the CBN’s goal was to lure Nigerians in the diaspora who were reportedly sending remittances via alternative channels, which use the black market exchange rate. By directing cross-border remittances to official channels, the CBN would be able to increase the amount of foreign currency that flows into its coffers. Large foreign currency reserves in turn would be used to support the naira. In March, an economist with the central bank declared that the scheme had achieved its objective and was thus a success.

Indirect Naira Devaluation

Nevertheless, some unnamed pundits quoted in the report insist the scheme alone cannot undo the pricing anomalies caused by inconsistent policies. Some experts and organizations even view the incentive scheme as a form of devaluation of the naira. For instance, Cowry Asset Management is quoted in Blueprint remarking on how the scheme may have sent the wrong signals to the market.

“However, we feel that the CBN’s Naira for Dollar Scheme appears to be another form of Naira depreciation which may have sent the wrong signal to the forex market,” the asset management firm said.

What are your thoughts on this story? Let us know what you think in the comments section below.

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Terence Zimwara

Terence Zimwara is a Zimbabwe award-winning journalist, author and writer. He has written extensively about the economic troubles of some African countries as well as how digital currencies can provide Africans with an escape route.

Advertisement
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Image Credits: Shutterstock, Pixabay, Wiki Commons

Disclaimer: This article is for informational purposes only. It is not a direct offer or solicitation of an offer to buy or sell, or a recommendation or endorsement of any products, services, or companies. Bitcoin.com does not provide investment, tax, legal, or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article.

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