Analysts Upbeat about CBN’s Proposed Digital Currency

James Emejo in Abuja and Nume Ekeghe in Lagos

Analysts have welcomed the planned introduction of digital currency by the Central Bank of Nigeria (CBN), saying it will improve the inflow of foreign exchange and boost the capacity of the apex bank to intervene in the economy.

The CBN had on June 10, 2021, unfolded plans to launch a digital currency before the end of the year.

But in separate interviews with THISDAY, some analysts said the move would also reduce pressure on the demand for forex and boost external reserves as well as enhance the value of the naira.

The analysts added that the development would deepen financial inclusion in the long run and lower the operational costs of handling physical cash and enhance the efficiency of payments systems.

Describing it as a step in the right direction, they added that the development will improve intra-African trade.
The Chairman of Chartered Institute of Bankers of Nigeria (CIBN), Abuja Branch, Prof. Uche Uwaleke, said the plan by CBN to launch a digital currency was particularly welcome in view of the inherent benefits.

He, however, expressed concerns about the associated risks regarding the likely impact on monetary policy transmission, financial stability, inflation as well as the role of financial institutions.

Uwaleke said: “These concerns and the level of our economic development make the suggested time frame unrealistic.
“Even the central banks of developed economies such as the US Fed Reserve and the European Central Bank are still researching the implications of introducing a CBDC.

“Therefore, while welcoming the idea, I expect the CBN not to be in a hurry and to commit resources to research in the area of digital currencies, including possible mechanisms for controlling private virtual currencies such as cryptocurrencies.”

The Divisional Chief Executive at Interswitch Group, Mr. Akeem Lawal, described the move as a forward-looking policy initiative from the regulator’s perspective, adding that it will enhance the convertibility of the naira.

He said digital currency would also help the country to benefit from the technology, which is the future of payments in every sphere of endeavour.

He said: “It is a path to enabling naira to become convertible. One of the disadvantages African countries and Nigeria face is that our currencies are not convertible but if we create a digital currency, it is probably one step towards creating a convertible version of the naira.

“If you layer that on top of a pan-African payment ecosystem, it would create a very strong payment system for the continent where it is possible to exchange African currencies amongst themselves.”

He said some forward-looking countries, including China, had already started creating their digital currencies.

“If you listen to what IMF and some other international agencies have been talking about and all of them have agreed that a central bank digital currency would transform the way cross border payments are done,” he stated.

In his contribution, Managing Director/Chief Executive, SD&D Capital Management Limited, Mr. Idakolo Gbolade, stated that the impact of digital currency on the economy will yield positive results.

He described the digital currency as the advanced means of exchange currently trending all over the world, adding that some countries have already legalised it.

Gbolade said the initiative would improve the inflow of forex into the country and increase the CBN’s capacity to intervene in the economy.

According to him, it will also help the bank to regulate the activities of digital currency traders and place Nigeria as a major player in the digital currency space.

On his part, Managing Director/Chief Executive, Dignity Finance and Investment Limited, Dr. Chijioke Ekechukwu, said the new legal tender would eliminate restrictions on accessibility to foreign currencies and thereby enhance foreign payments and trade.

According to him, it will also reduce pressure on demand for foreign currency and external reserves.

“The value of the naira will improve significantly and forces of demand and supply will hardly affect the exchange rate. I think it is a good initiative.

“This is a welcome development. CBN wants a digital currency that can be regulated by them, unlike the cryptocurrency,” he added.
Also, Investment Research Analyst at United Capital, Mr. Ayorinde Akinloye, said the initiative was a positive development by the CBN.

He, however, sought for more clarity on the modalities and framework for the implementation of digital currency so it could be scrutinised by analysts to get quality inputs.

Akinloye said creating a digital currency was in line with most of the new trend seen across the globe, adding that “it is definitely in line with what you think the future of money would be because money would evolve beyond paper.”
He said the initiative would boost settlement time and support stock exchange activities by providing quick turnaround time on transactions.

Managing Director/Chief Executive, Credent Investment Managers Limited, Mr. Ibrahim Shelleng, also described the CBN’s plan as “possibly the boldest step that the CBN has taken and it will be interesting to see how it will be adopted and implemented.”

He said digital currency was the way forward for financial systems, adding that the cost of printing fiat currency will eventually be eliminated in the long run.

He stated that the future possibilities are endless while the implications on contracts and financial management cannot be overemphasised.

Shelleng said: “Of course change will always encounter resistance from those that have enjoyed the loopholes in the current financial systems.

“But the only thing constant is change. Adopting a digital currency will also provide an avenue for more foreign investment given that the digital currency is not subject to manipulation from governments and therefore subject to supply demand dynamics.”

He said while the underlying blockchain technology provided transparency and efficiency to financial systems, it would be of invaluable benefits to the country.

“Bitcoin acceptance has gone mainstream now with global corporations and some countries adopting it as legal tender so certainly, the move by CBN is in the right direction,” he added.