A consortium of Nigerian banks, fintech, and blockchain companies is developing the first regulated Naira stablecoin, cNGN.
The new stablecoin cNGN will be a consortium-based compliant and regulated Naira stablecoin. cNGN will be pegged 1:1 to NGN, but unlike previous stablecoin drafts, it will be owned by Nigerian banks and will be legal tender.
According to Forbes sources, the launch is planned for 2024.
Unlike previous versions, cNGN will be a cryptocurrency — like other stablecoins — and not a CBDC. Also, the coin will be serviced by the consortium and owned by its banks.
It is noteworthy that just a day ago, transactions with cryptocurrencies were allowed in Nigeria. Previous rules introduced by the country’s Central Bank in February 2021 prohibited credit institutions from conducting cryptocurrency-related transactions. The lifting of the ban stems from the understanding that cryptocurrencies play an important role in global financial systems and their use in Nigeria is inevitable.
Nigeria has already made several attempts to transition to a digital currency. In 2012, Nigeria introduced its cashless policy on the premise that moving away from cash would make its payment system more efficient, reduce the cost of banking services, and improve the effectiveness of monetary policy.
However, the adoption rate of cNGN’s predecessor, a CBDC called eNaira, has been low since its launch on Oct. 25, 2021, despite nearly 40 million people in the country needing a bank account. Nigeria’s central bank has struggled to convince citizens to use CBDC, but the digital currency has attracted only one in 200 citizens.
The newly proposed cNGN will be a compliant and regulated consortium-based Naira stablecoin. The cNGN will be pegged 1:1 with NGN, but unlike previous NGN stablecoin attempts, it will be held by Nigerian banks.
The key partners in the consortium include prominent Nigerian tier-1 banks such as First Bank, Access Bank, Sterling Bank, and Providus Bank, payments companies Budpay, Kora (formerly KoraPay), and Interswitch, and Blockchain consultants Convexity and Interstellar. The proposed cNGN stablecoin, similar to existing stablecoins, will facilitate seamless international transfer of NGN.
Nevertheless, there are still many unknowns about the cNGN that will need to be clarified by the consortium, such as the blockchain it will use and the planned apps and services for consumers.
Differences With The eNaira
There are a few key differences between the eNaira and cNGN worth noting; for starters, the cNGN will be a crypto, like other stablecoins, and not a CBDC. The cNGN will be maintained by the consortium and will be held by the banks in the consortium.
The CBN will not have direct control over the cNGN in the same way it does with the eNaira, and the role it, along with the Nigerian Securities and Exchange Commission, will be playing is one of regulatory oversight.
The benefits and effects of the cNGN stablecoin on monetary policy and FX could be more significant than the eNaira, given its wider target reach. Further, the cNGN might indeed have greater adoption and success than the eNaira, especially given the recent reversal of the CBN’s bitcoin ban and their new guidelines on digital assets.
The cNGN, eNaira, And Other Nairas In 2024
There was initial speculation about the motives of the CBN in 2021 for its bitcoin ban, as being done to pave the way for its CBDC to dominate. However, even if true, it certainly didn’t work. Nevertheless, the cNGN would only be possible with the recent CBN circular and their cooperation as a regulator alongside the Nigerian SEC.
Following the harsh year in Nigeria and the Naira situation, in 2024, there will now be four distinct instances of the Naira in circulation, a mix of both digital (NGN, eNaira, and cNGN) and old and new physical Naira notes, which is sure to persist some of the economic challenges observed in 2023 and have effects on monetary policy, FX controls, and overall market dynamics.
The stage is set for more ecosystem stakeholders and traditional financial players to collaborate, innovate, and build less cumbersome hybrid financial services—although the extent of this interplay will be determined primarily by the restrictions and flexibility introduced and enabled by the CBN and Nigerian SEC.
