Nigeria’s digital currency eNaira, introduced last October, is a boon for inclusion, Kingsley Obiora, deputy governor of the country’s central bank, said during a virtual event moderated by the Africa director of the International Monetary Fund, Abbe Aemro Selassie.
Its launch – the first by an African central bank – was met with skepticism by industry experts and cryptocurrency users, and Mr. Obiora did not reveal the extent of its use.
Kenya could follow suit with its own digital currency to reduce payment and cross-border transaction costs, said central bank governor Patrick Njoroge.
Both central bankers were critical of cryptocurrencies, with Mr Obiora saying they weren’t stable enough to be a means of payment.
“The volatility they create can become a source of instability in the system,” he said.
Crypto-assets have flourished in Nigeria, despite a ban on banks handling them since February 2021. They have also proven popular in Kenya, despite central bank warnings about their risks.
“There’s been a lot of hype,” Njoroge said of cryptocurrencies, noting the relatively low number of transactions per second possible with bitcoin. He suggested that crypto-assets could be regulated as a “wealth product”.
Njoroge said the central bank was evaluating responses to a public consultation on a central bank digital currency.
Financial inclusion, he said, is a less pressing need than in Nigeria, given the high usage of mobile money in Kenya.
South Africa, which is participating in a digital currency pilot project with Malaysia, Singapore and Australia, has also cited cross-border payments as a potential use.
Njoroge and Obiora said fuel price inflation caused by Russia’s war in Ukraine was causing problems, with the Nigerian banker noting that ordinary people were suffering the most.
“We are under a lot of pressure because of this, let’s say as a collateral damage, especially the price of fuel,” Njoroge said. “We hope the G7 will sort out the problem with the Russians and other oil exporters and bring the prices down.”
Kenya’s central bank raised interest rates by 50 basis points last month, the first increase in nearly seven years, in an attempt to bring inflation under control.
Nigeria also raised its benchmark rate in May, the 150 basis point hike the first in more than two years.