IMF offers technical assistance to CBN on eNaira
The International Monetary Fund, IMF, yesterday, said it will provide technical assistance and policy advice to the Central Bank of Nigeria, CBN, on the evolution of the eNaira.
The IMF stated this in a report, titled, “Five Observations on Nigeria’s Central Bank Digital Currency”, stressing that while the e-Naira has the potential for financial inclusion and boost Diaspora remittances, it is also vulnerable to cybersecurity and operational risks associated with the eNaira, given its reliance on digital technology.”
Consequently, the IMF urged the CBN to watch the product with a view to properly managing risks that may arise from the initiative.
On boosting remittances, the Fund said, “Nigeria is among the key remittance destinations in sub-Saharan Africa, with remittance receipts amounting to $24 billion in 2019.
“Remittances typically are made through international money transfer operators (e.g., Western Union) with fees ranging from 1 percent to 5 percent of the value of the transaction.
“The eNaira is expected to lower remittance transfer costs, making it easier for the Nigerian diaspora to remit funds to Nigeria by obtaining eNaira from international money transfer operators and transferring them to recipients in Nigeria by wallet-to-wallet transfers free of charge.
“Exchange rate reforms, including a unified market-clearing rate, that reduce the gap between official and parallel market exchange rates would enhance the incentives for using eNaira wallets to send remittances.”
Highlighting the risks associated with the eNaira, the IMF said, “Like digital currencies elsewhere, the eNaira carries risks for monetary policy implementation, cyber security, operational resilience, and financial integrity and stability.
“For example, eNaira wallets may be perceived, or even effectively function, as a deposit at the central bank, which may reduce demand for deposits in commercial banks.
“Relying as it does on digital technology, there is a need to manage cybersecurity and operational risks associated with the eNaira.”
Assuring the CBN of its readiness to support the evolution of the eNaira, the IMF said: “The IMF remains available to help with technical assistance and policy advice. The IMF’s Monetary and Capital Markets Department has been involved in the eNaira rollout process, including by providing reviews of the product design.”