Digital Currency Launch in Nigeria Matters for Rest of the World: Investigative Journalist

Digital Currency Launch in Nigeria Matters for Rest of the World: Investigative Journalist
Nick Corbishley, investigative journalist and author, is interviewed on EpochTV’s “Crossroads” program on Dec. 9, 2022. (Screenshot/ EpochTV)
Ella Kietlinska
Joshua Philipp
1/5/2023
Updated:
1/5/2023
0:00
Major central banks have been watching how Nigeria’s new central bank digital currency has fared since its launch a year ago as they prepare to introduce digital currencies in their own countries, said Nick Corbishley, investigative journalist and author.
The current push for centralized digital currencies was made feasible through digital identity technology that enabled a level of control over people which was unimaginable 10 or 15 years ago, Corbishley said in a recent interview for EpochTV’s “Crossroads” program.

Corbishley wrote the book “Scanned: Why Vaccine Passports and Digital IDs Will Mean the End of Privacy and Personal Freedom.”

Digital currencies are issued by central banks directly to consumers, individuals, and businesses, cutting out the middlemen, although some big intermediaries could still be allowed to exist, Corbishley said.

Central banks cooperate on digital currency with governments to the point that it is very hard to determine the extent to which central banks control governments or governments control central banks, he said. It is difficult to see “where one ends and the other begins.”

Corbishley thinks that if banks have the ability to determine what people and businesses can and cannot spend their money on, “it will be unprecedented levels of control over us” and it would mean restricting financial transactions of individuals and small- or medium-sized businesses to certain spaces and certain places.

“This is what is called programmable money,” he added and compared it to a “kind of financial lockdown.”

With cash, it is not possible to track how the money is spent, as one person can give cash to another person as a gift without any middleman, and nobody knows about this handout, Corbishley said. In a world with central bank digital currencies—a world without cash—“that will no longer be a possibility. Every payment we make will be tracked and traced, and possibly there will be fees placed on it,” he noted.

“It is the loss of anonymity, it is the loss of privacy, and it is ... the consolidation of a centralized power that most of us still can’t even imagine what it would look like.”

Push for Central Bank Digital Currencies

A sign for China's new digital currency, electronic Chinese yuan (e-CNY), is displayed at a shopping mall in Shanghai on March 8, 2021. (STR/AFP via Getty Images)
A sign for China's new digital currency, electronic Chinese yuan (e-CNY), is displayed at a shopping mall in Shanghai on March 8, 2021. (STR/AFP via Getty Images)

Some countries have experimented with central bank digital currencies (CBDCs), but no country has gone further than China, which has been planning its digital currency since 2014, Corbishley said. However, China has not officially launched a CBDC beyond the pilot test phase, but its pilot includes about two dozen cities representing a significant portion of its population, he added.

A May report (pdf) from the Bank of International Settlements showed that almost 90 percent of national central banks are planning to launch their own CBDCs for release to the general public.
Major central banks, however, are watching the implementation of a CBDC in Nigeria called eNaira (pdf), Corbishley said.
“This is the second CBDC fully open to the public after the Bahamas,” the International Monetary Fund (IMF) said about eNaira on its website.

In the United States, the Federal Reserve has already launched a 12-week pilot program with nine major financial institutions, including Citigroup Inc., Mastercard Inc., and Wells Fargo & Co., to experiment with a CBDC and a proof-of-concept digital money platform called the Regulated Liability Network.

Although the Fed said that it wouldn’t use the results of the pilot to form policy or decide about establishing a CBDC, the central bank has come under pressure from Washington to keep up with other nations that have digitized currencies, particularly China.
The European Central Bank (ECB) has been exploring the possibilities of a digital euro, Christine Lagarde, president of the ECB, said at an international conference hosted by France’s central bank on Sept. 27. In 2023, the ECB will make a decision on whether to launch a realization phase of the digital euro project, Lagarde said.

Loss of Anonymity

Launching the digital euro would involve “some sacrifice in privacy and anonymity,” Corbishley pointed out.

“When we surveyed Europeans, the first concern that they had, in addition to the support to the digital euro, was privacy,“ Lagarde said at the conference. ”Privacy is first and foremost on their mind when we develop the digital euro.”

The ECB president also noted that “there would not be complete anonymity as there is with bank notes, for instance, but there would be a limited level of disclosure, and certainly not at the central bank level.”

Federal Reserve Chairman Jerome Powell said at the same conference that if a CBDC is to be pursued in the United States, it would require identity verification so “it would not be an anonymous bearer instrument.”

“We would be looking to balance privacy protection with identity verification,” Powell said.

War on Cash

Edwin Lopez sorts the money in the cash register at Frankie's Pizza in Miami on Jan. 12, 2022. (Joe Raedle/Getty Images)
Edwin Lopez sorts the money in the cash register at Frankie's Pizza in Miami on Jan. 12, 2022. (Joe Raedle/Getty Images)

“At least over the last decade, we’ve seen a gradually escalating war on cash,” Corbishley said.

“There are very powerful interests who would love to have a world without cash,” Corbishley said, and on top of that list are some Big Tech companies and many of the credit card and payment processing companies.

Banks have an interest in reducing the use of cash because it’s expensive for them, he said.

Central banks, on the one hand, want to preserve cash because it’s important in the face of the threat posed by cryptocurrencies, stablecoins, and all other digital forms of money, which are private forms of money, Corbishley explained.

Stablecoins tend to provide a stable value by pegging their value to the price of another asset, such as a currency like the U.S. dollar or a commodity like gold.
On the other hand, Corbishley said central banks are “clearly taking very large strides towards setting up the central bank digital currencies.”

Nigeria Pushes for Digital Money

A customer withdraws Nigerian naira from an ATM at a bank in Asaba, Delta State, Nigeria, on Nov. 10, 2016. (Pius Utomi Ekpei/AFP via Getty Images)
A customer withdraws Nigerian naira from an ATM at a bank in Asaba, Delta State, Nigeria, on Nov. 10, 2016. (Pius Utomi Ekpei/AFP via Getty Images)
Since the introduction of its CBDC, eNaira, in October 2021, Nigeria has managed to get about 1 million people out of the roughly 220 million population to download the application that allows them to use the digital currency. Of those, only about 280,000 people are actually using it, Corbishley said.

“So the uptake has been around about 0.1 percent,” Corbishley said, “despite the fact that the central bank has done everything and the government have done everything they can to encourage people to use it. They have banned banks from allowing transactions or enabling transactions involving cryptocurrencies in a country where cryptocurrencies are gaining more and more interest.”

After a year, Nigerian policy to replace cash with a digital currency has not seemed to work, Corbishley asserted, so the Nigerian central bank resorted to demonetization through banknote redesign.

The redesign involved “withdrawing high-value notes from the economy in order to reintroduce the notes in a new format,” Corbishley explained. “It can also be used to reduce the ability of people to use cash.”

The Central Bank of Nigeria (CBN) announced in October the redesign of the nation’s three highest banknote denominations of 1,000 naira, 500 naira, and 200 naira (equal to about $2.23, $1.11, and 45 cents, respectively) to replace them with new currency notes.

The new currency began circulation on Dec. 15, 2022. Nigerians have a month and a half to deposit the old notes to their bank accounts before they cease to be legal tender, according to a statement (pdf) by the Nigerian central bank. Those who do not have a bank account are encouraged to open one as there will be no outright exchange of new banknotes for the old ones, the statement said.
Central Bank of Nigeria's (CBN) governor Godwin Emefiele gives a press conference on the naira devaluation during a media briefing in Abuja on June 15, 2016. (Philip Ojtsua/AFP via Getty Images)
Central Bank of Nigeria's (CBN) governor Godwin Emefiele gives a press conference on the naira devaluation during a media briefing in Abuja on June 15, 2016. (Philip Ojtsua/AFP via Getty Images)
The central bank governor, Godwin Emefiele, told the press in October (pdf) that one of the currency management challenges the country had faced was “significant hoarding of banknotes by members of the public, with statistics showing that over 85 percent of currency in circulation are outside the vaults of commercial banks.”

“We believe that the redesign of the currency will help deepen our drive to entrench a cashless economy as it will be complemented by increased minting of our eNaira. This will further rein in the currency outside the banking system into the banking system,” Emefiele said.

To further encourage people to use digital currency, Nigeria announced in early December that it would limit over-the-counter and ATM cash withdrawals to 20,000 naira ($45) per day, per person.

This is an 87 percent reduction in what Nigerians normally could withdraw from their bank accounts, Corbishley said. “It’s a massive change in people’s lives.”

The bank also capped the maximum weekly cash withdrawals for individuals and companies at 100,000 naira ($223) and 500,000 naira ($1,113), respectively. However, two weeks later, the central bank increased the weekly limits five times for individuals and 10 times for companies, stating that the decision was “based on feedback received from stakeholders,” according to its statement (pdf).

Testing Ground

Watching the development of a CBDC in Nigeria is important “because it is the first major economy on the planet to have launched a central bank digital currency,” Corbishley asserted.
The Nigerian economy is one of the largest in Africa, with its gross domestic product (GDP) ranking first on the continent when converted to U.S. dollars, according to Statista, and second when adjusted for local prices, according to World Population Review. Nigeria is also the most populous country in Africa, and in terms of GDP per capita is well below the top ten African countries.
The World Bank ranks Nigeria’s GDP 30th in the world.
Corbishley said that Africa is a perfect testing ground for initiatives like CBDC because it is a region of the world where many people are unbanked. In Nigeria, only 45 percent of the population has a bank account while 55 percent of the population doesn’t, he added.
This is a massive gap that needs to be filled, and it is partly being filled by payments between people through mobile phones, Corbishley said. He also believes that it is easier to carry out the global agenda in Africa, citing the recent launch of vaccine passports by the African Union for all its citizens as an example.

The African Union depends on finance from external entities beyond Africa, so with that level of dependence, “it’s so much easier to get things done,” Corbishley explained.

However, there have been warnings from many different organizations and NGOs about how Africa is being used and how the digital programs are being used by authoritarian governments, he noted.

“If a central bank digital currency gets launched in the United States, they will have to jump over so many different legal barriers. That is not going to be easy. ... I think everybody needs to be watching what’s happening in Nigeria.”

Andrew Moran and Katabella Roberts contributed to this report.