IMF says Nigerian CBDC pulls global interest and warns of associated risks - fintech
IMF says Nigerian CBDC pulls global interest and warns of associated risks - fintech
The International Monetary Fund (IMF) has recognized that the recently introduced digital currency of the Nigerian Central Bank (CBDC) attracts the interest of many institutions worldwide, including central banks. However, the fund warns that the CBDC has risks to implement monetary policy, cyber security, operational resistance as well as financial integrity and stability.
cbdc arouses interest
In the latest country focus The IMF wrote from the economist Jack Ree explained why Nigeria's new CBDC has attracted great interest from the outside world and in particular from central banks. In the report, the author states that in contrast to cryptocurrencies such as Bitcoin or Ethereum, e-naira has strict access rights controls by the central bank. In contrast to volatile cryptocurrencies, the CBDC also creates its value from the physical Naira.
According to IMF, the central bank of Nigeria (CBN) hopes that its CBDC will bring several advantages of the Nigerian economy. The planned advantages include greater financial integration and a reduction in informality.
CBDC-BOON for transfers
The report also explains why the CBN hopes that the CBDC will boost the transfers into the country. The report says:
transfers are usually made via international money transfer providers (e.g. Western Union) with fees between 1 and 5 percent of the transaction value. The E-Naira is expected to reduce the transfer costs and make it easier for the Nigerian diaspora to transfer funds to Nigeria by receiving enaira from international money transfer providers and transferring them free of charge from wallet to recipient in Nigeria.
The same IMF report, however, confirms the common view that CBDC deposits could actually act as deposits at the central bank and to reduce the demand for deposits at commercial banks. The report also warns of other risks related to the CBDC. "Since it relies on digital technology, the cyber security and company risks associated with Enaira must be managed," writes the author.
In summary, the report states that the IMF, which was involved in the introduction of E-Naira, is still available to CBN with technical help and political advice.Do you agree to the comments of the IMF to the Nigerian CBDC? Tell us your opinion in the comment area below.
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