Central bank digital currency in Nigeria: opportunities and risks

Ozili, Peterson K (2021): Central bank digital currency in Nigeria: opportunities and risks. Forthcoming in:

Abstract

Nigeria became the first African country to issue a central bank digital currency (CBDC) or fiat digital currency. It was pioneered by Project Giant. This paper discussed the features, opportunities and risks of the central bank digital currency (CBDC) in Nigeria, also known as the eNaira or e-Naira. The opportunities which CBDC present to Nigeria include, improved monetary policy transmission, efficient payments and increased financial inclusion. Some of the identified risks include rising digital illiteracy, increased propensity for cyber-attacks, data theft, and the uncertain role of banks in a full-fledged CBDC economy. This article contributes to the literature by evaluating the pros and cons of fiat digital currency such as a central bank digital currency.

• Item Type: MPRA Paper
• Language: English
• Keywords: central bank digital currency, eNaira, blockchain, cryptocurrency, central bank, CBDC, bitcoin, payment system, fiat digital currency, distributed ledger, Nigeria.
• Subjects: E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E51 - Money Supply ; Credit ; Money Multipliers; E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E52 - Monetary Policy; E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E58 - Central Banks and Their Policies; E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E59 - Other; G - Financial Economics > G1 - General Financial Markets > G18 - Government Policy and Regulation; G - Financial Economics > G2 - Financial Institutions and Services > G21 - Banks ; Depository Institutions ; Micro Finance Institutions ; Mortgages

References

Andolfatto, D. (2021). Assessing the impact of central bank digital currency on private banks. The Economic Journal, 131(634), 525-540.

Barontini, C., & Holden, H. (2019). Proceeding with caution-a survey on central bank digital currency. Proceeding with Caution-A Survey on Central Bank Digital Currency (January 8, 2019). BIS Paper, (101).

Bordo, M. D., & Levin, A. T. (2017). Central bank digital currency and the future of monetary policy (No. w23711). National Bureau of Economic Research.

Davoodalhosseini, S. M. (2021). Central bank digital currency and monetary policy. Journal of Economic Dynamics and Control, 104150.

Engert, W., & Fung, B. S. C. (2017). Central bank digital currency: Motivations and implications (No. 2017-16). Bank of Canada Staff Discussion Paper.

Grym, A., Heikkinen, P., Kauko, K., & Takala, K. (2017). Central bank digital currency. Bank of Finland BoF Economics Review, No 5.

Ozili, P. K. (2019). Blockchain finance: Questions regulators ask. In Disruptive innovation in business and finance in the digital world. Emerald Publishing Limited.

Ozili, P. K. (2021). Central bank digital currency can lead to the collapse of cryptocurrency. Available at SSRN 3850826.

Wadsworth, A. (2018). The pros and cons of issuing a central bank digital currency. Reserve Bank of New Zealand Bulletin, 81, 1-21.