I see the fusion of blockchain and cryptocurrency from two angles and in both, Nigeria can play major roles in West Africa if not the whole continental Africa. First, Nigeria can become a trillion dollar economy by making Lagos or any of the major cities the hub for digital currency/blockchain innovations. Nigeria needs sandboxes for testing models for digital currency and blockchain across industrial sectors including banking, insurance, real estate and more.
The Central Bank of Nigeria needs to put smart regulations for cryptocurrency and blockchain and make Nigeria the preferred destinations for innovations in these areas. Globally, the plan to stifle the adoption of these emerging technologies is not a smart policy. There is no technology that rises the way blockchain has done that vanishes without impacts.
In less than a decade, Bitcoin and blockchain are now household names. They are for real. Yet, that does not mean the former is safe. We must stay ahead and lead Africa, at least, and make our country the centerpiece of the digital future.
Secondly, why I may not believe in Bitcoin, I have so much confidence in the durability and sustainability of blockchain. Since the leading nations like U.S. and Germany have refused to regulate these new technologies, Nigeria has an opportunity to lead and enjoy the benefits inherent in them. Whether the world likes it or now, Bitcoin or its incarnate under the architecture of blockchain is certain to be part of future commerce. The earlier we understand that and make it legal, the better.
According to the Bloomberg, it seems the moment is emerging. Simply, Nigeria’s Central Bank cannot ignore digital currencies. The best strategy for us will be to issue our own digital currency and tie it to the value of the Naira.
The world’s central banks can’t ignore the growth in cryptocurrencies and may at some point have to consider whether it makes sense for them to issue their own digital currencies, according to the Bank for International Settlements.
“Whether or not a central bank should provide a digital alternative to cash is most pressing in countries, such as Sweden, where cash usage is rapidly declining,” the BIS said in its quarterly review. “But all central banks may eventually have to decide whether issuing retail or wholesale CBCCs makes sense in their own context.”In making these decisions, institutions will need to take into account of not only privacy issues and efficiency gains in payment systems, but also potential economic, financial and monetary policy repercussions, according to the BIS.
It is already happening with the “Dutch central bank having created its own cryptocurrency, albeit for internal use only”, according to the referred report. In March, Federal Reserve Governor Jerome Powell had acknowledged that U.S. is also exploring the technology. They have to understand challenges around cyber-attack, privacy and counterfeiting. Nigeria needs to do likewise and begin that trajectory of working to make sense on how we can play a major role in the future digital currency. A good idea will be to tie that currency to our national currency, just as the BIS suggested in the report..
According to the BIS, one option for central banks might be a currency available to the public, with only the central bank able to issue units that would be directly convertible with cash and reserves.
The Big Tech Utilities
Many people like Bitcoin but to use it is still hard. I expect the ICT utilities like Google and Facebook to simplify it. Google is marching on that path with its payment API update which can in theory “accept” Bitcoin.
According to Gaundry, the new functionality that enables bitcoin payments is meant for accepting future payment methods that don’t fall under the official list of methods. So, in theory, the API could support any currency as long as it has a three-letter code. Talk about competing currencies; merchants can potentially accept any digital currency under the sun. By using bitcoin as an example for how this new utility works, though, Gaundry — intentionally or not — has suggested that the future might already be here.
We do not need Bitcoin but Nigeria needs a digital currency tied to the Naira that will enable the efficient functioning of the blockchain infrastructure which I expect to evolve in coming years in the nation. If the Central Bank blesses such a plan, we will experience a virtuoso innovation system in redesigning the architecture of some of our industrial sectors and make them more efficient even while being cost-efficient. As I noted in my entry on Blockchain Africa, blockchain has a promise for Africa. Nigeria just have to find a way to lead in that promise atleast in West Africa where its impact is huge.
Blockchain can be deployed in agricultural value chain, insurance, pharmaceutical supplies, peer-to-peer trading and lending, cross-border commerce, banking and other sectors in the continent. This underlining technology that supports Bitcoin, the crypto-currency, offers many capabilities to power new forms of business models owing to its consensus-driven decision architecture and trust networks. Blockchain delivers reliable, quality and verifiable data which enables assured digital identity during transactions. Bankymoon, a blockchain-based smart metering solution provider for power and utility grids, and BitPesa, a startup that enables trading on digital currency, are examples of the applications of blockchain to businesses. Another company, EnLedger, uses blockchain to combat fake drugs besides other applications like energy, law and land management. Circle, a startup funded by Goldman Sachs uses blockchain to make international remittance done at zero cost to the customers
The reason why we need leadership from the CBN is that without its ratification, the investing community will not support most of the blockchain-based projects in Nigeria. The reason is simple: you can build a blockchain-based remittance and CBN can ban it from being connected to our financial system. So, a regulation is needed for all the stakeholders to have clarity on the way forward. That will help unlock opportunities in the ecosystem.
Tekedia Mini-MBA edition 13 (Feb 5 - May 4, 2024) has started, join Prof Ndubuisi Ekekwe and our global faculty here.