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IMF re-iterates its skepticism on Nigeria’s digital currency for 2nd time in one month

The IMF has re-iterated its skepticism for Nigeriaa’s digital currency for the second time in one month
  • IMF analyses Nigeria's eNaira digital currency, praising its first-year performance but suggesting improvements for financial inclusion and remittances. 
  • eNaira handles retail transactions effectively, but only 1.5% of wallets are active weekly, indicating low adoption. 
  • The IMF suggests enabling foreign money transfer companies to accept eNaira wallets or introducing intermediaries to support remittances and increase usage.

The International Monetary Fund (IMF) has its 2 cents on Nigeria's homemade digital currency in the shape of a study paper analysing the first year's performance of Nigeria's central bank's digital currency, eNaira. the gift of money.

IMF analysts praised the eNaira's inaugural year but made further recommendations for strengthening its fundamental mission.

The IMF's report showed that the eNaira handled the retail aspect, but since those early adopters had not yet established themselves, waiting periods were not a problem.

According to IMF experts, the central bank of Nigeria has implemented a staggered rollout that undercuts the CBDC's two key objectives of promoting financial inclusion for the unbanked and enabling remittances.

With just 802,000 transactions made overall throughout the research period, only roughly 1.5% of wallets are active each week. fewer than 1% of bank accounts in the nation have wallets, hence the results indicate fewer than one per wallet.

The IMF claims that the eNaira is a single-currency system and cannot support remittances directly, but it also noted that this might be fixed by enabling foreign money transfer companies to accept eNaira wallets or via intermediation.

Less than 1.15 million Nigerians, or around 0.5% of the population, had utilized eNaira as of October 2022. Officials from the Central Bank of Nigeria (CBN) informed reporters earlier this month that just 1.4 million transactions had really been completed since the eNaira platform's introduction.

Earlier this month, in an interview given on May 1 at the Milken Institute's 2023 Global Conference, Kristalina Georgieva, head of the IMF emphasized her worry regarding retail CBDCs. She claimed that the IMF believes retail CBDCs have far more leeway for error than wholesale CBDCs.

A report from Cointelegraph describes wholesale CBDCs as state-backed virtual currencies that central banks issue to allow financial institutions to carry reserve deposits with a central bank. Retail CBDCs are state-backed virtual currencies that central banks issue for use by people and businesses.

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