The Central Bank of Nigeria plans to introduce the Unstructured Supplementary (USSD) code as part of steps to improve the Central Bank Digital Currency (CBDC).
This was disclosed by the Deputy Governor of the CBN, Kingsley Obiora, at the IMF African Department Speakers Series held virtually on Friday.
Obiora said that Nigeria was doing well based on a PwC report which showed that Nigeria was number one in terms of adoption, adding that the CBN would keep growing and improving on the system.
What CBN is saying
Obiora said the introduction of the USSD code became necessary to improve financial inclusion in the country and to ensure people without smartphones could still transact on the eNaira platform.
He said “We have made serious progress in the last seven to eight years because when the current governor resumed in 2014, one of the pillars of his vision was to significantly improve financial inclusion. So at the time, we were at 48 per cent of our population within the financial system and given several policies that he conceived and implemented, we are almost at 70 per cent.”
“That still leaves us with about 30 per cent of our population out of the financial system and we believe the CBDC can help reduce that number even more. A lot of people might not have smartphones but that is essentially the next step of our improvement in the CBDC, to introduce the USSD code, so those that do not have smartphones can still transact,” Obiora added.
The CBN deputy governor said that the barrier to entry on the CBDC platform was low, which made it possible for everyone with a Bank Verification Number (BVN) to be onboarded into the eNaira platform in a few minutes.
Obiora stated that the USSD code was introduced to increase financial inclusion in the country and to ensure that those without cellphones could still interact on the eNaira platform.
”As you know, within the continent, we have one of the largest Fintech companies, Futterwave, Paystack, etc,“ the apex bank boss added.
He stated that the CBDC would provide enormous benefits to Nigeria, which is why the CBN opted to implement it. Obiora cited the benefits as rapid financial inclusion, lower cash processing costs, direct welfare payments to citizens, and a reduction in the informal sector.
Others include increasing tax collection, increasing cross-border trade and remittances, lowering payment costs and enhancing payment efficiency, and simply encouraging economic growth in general.
He did, however, mention some of the primary dangers of establishing the CBDC, which include banking sector disintermediation, operational risks associated with knowing that there is continuous service, cyber security concerns, internet outages, and financial literacy.
What you should know
- Africa’s first digital currency, eNaira, has been ranked No 1 global retail CBDC, and app downloads have jumped to 756,000 from 700,000 seen in December 2021.
- PwC disclosed the ranking in its 2022 CBDC Global Index and Stablecoin Overview. The eNaira has also recorded 700,000 downloads as of December 2021, while over 35,000 transactions have been conducted on the platform.
- The report also gave Nigeria’s eNaira a retail index value of 95 while the country also ranked number one in Africa. The index is based on a BIS working paper, the World Bank, and PwC analysis.
- The IMF has warned about the potential expansion of the use of the eNaira for cross-border fund transfers and agency bank networks could lead to new money-laundering and terrorism financing risks