e-Naira is our response to cryptocurrency-CBN
The Central Bank of Nigeria (CBN) has revealed that it created the e-Naira as a result of the threat posed by cryptocurrency to central banks.
CBN Deputy Governor Economic Policy made this disclosure while delivering the keynote address at the Business Session of the Fiscal Liquidity Assessment Committee (FLAC) retreat, organized by the Central Bank of Nigeria in Abuja.
Obiora said creators of cryptocurrency were beginning to question central banks’ authority over money.
“We as central bank had to respond by creating the central bank digital currency called the e-Naira which is Africa’s first digital currency”.
“We are very delighted that today a lot of central banks are coming on study tours to the CBN and understand and under study what we have done”.
The CBN Deputy Governor assured that the e-Naira’s platform is very stable, and already responding to monetary policy.
In his words, “the mechanism of monetary policy basically tells you how fast a transaction can occur and what you can do as a monetary authority to use that response in the control of money supply and monetary policy itself”.
Cryptocurrency emerged in the wake of the COVID-19 pandemic. The Central Bank of Nigeria (CBN) Obiora said responded by “printing money.
However, members of the private sector, fearing that the CBN’s decision to print more money will lead to hyperinflation decided to create cryptocurrency as a response.
Over time the creators of cryptocurrency, he said, felt “that central banks should not be left with the authority to do whatever they like with money”.
According to Obiora, “when the central bank started reacting to COVID with what we call printing money and responding to the crisis, a lot of people in the private sector felt that printing of money could lead to hyper inflation and these private sector people decided to respond by creating crypto currencies.
“With the intensification of crypto currencies they felt that central banks can not just be left with the authority to do whatever they like with money and that might cause inflation and reduce the purchasing power of households but again central banks needed to respond to what we might call the good aspect of that change because a lot of people actually took to crypto currencies”.
Having had enough of the threats of cryptocurrency creators, Obiora said “we kicked them out of our banking system because the opacity of the system is still a threat to financial system stability”.
Also speaking at the occasion, Dr. Hassan Mahmud Director, Monetary Policy Department said Nigeria is contending with several headwinds, like: rising consumer prices, high public debt and its servicing costs, dwindling fiscal revenues, and weak economic recovery.
These challenges he noted, “require innovative and strategic responses to address them”.
The Central Bank of Nigeria he stated, continued “to implement various quasi-fiscal measures to support the federal government’s effort to manage the general economy, stimulate growth and ensure people-oriented programmes.
These developments around Nigeria’s fiscal and monetary operations he said further highlights the need for a coordinated approach towards managing the Nigerian economy.
He lamented that “the country’s fiscal stress was been stoked by global Covid-19 pandemic and its associated lockdown measures, unhealthy developments in the nation’s oil industry, declining national revenue, among others.
“The government’s response to these headwinds led to substantial budgetary allocations to boost economic activity and provide social safety nets, resulting in significant increases in public debt and its service costs.
“In addition, the wide-spread adoption of electronic modes of payment has further impacted monetary policy management in the Central Bank’s efforts to ensure price and financial system stability.
As a result of these developments, Dr. Hassan Mahmud called for “a comprehensive fiscal consolidation effort to boost revenue mobilization and strengthen the efficiency of public expenditures.
“It has also become imperative that fiscal and monetary authorities should intensify ongoing collaborative efforts and provide assurances that envisaged macroeconomic objectives are achievable under the present conditions” he said.
