Nigeria: Money technology and the rise of digital currencies
- 28 April 2022 / News / 356 / Fares RAHAHLIA
Regardless of technological and financial innovations, money is a form of technology that has been around for a few thousand years. But it changed a little in terms of its fundamental nature and effects.
It was heartwarming when the Minister of Communications and Digital Economy, Prof. Isa Pantami announced policy initiatives that promote investment in infrastructure in the Nigerian telecom industry in order to deepen connectivity to enhance the nation’s growth and development.
Speaking on the sideline of the reception marking the landing of the Equiano undersea Cable System in Nigeria, Pantami said the government is driving the implementation of existing digital economy-oriented policies for the transparent and secured online transactions by also encouraging foreign and local investment in infrastructure projects such as the way Google and its co-investors have done.
Money as we know it is nearing the end of its life cycle. People are eager to declare the end of new technology and dismiss it as unavoidable. Every technology is eventually superseded by a better, more advanced one.
Now it’s happening with money, which is an out-of-date technology in which we print pictures on pieces of paper and assign a value to them because the government says so.
But historically, the currency has had its expiration date due to changes in diplomatic agreements or technological development. We’ve gone from seashells, cowries, gold coins, coins, paper, and now digital. We’re already witnessing the transition to a cashless society, but is there more to this shift?
Money has the power to build and destroy civilizations. It plays an undeniably important role in everyone’s lives today, whether they recognize it or not. Money’s introduction can be considered the final stage in bringing the world to where it is now. From the technology we use to the conflicts we fight, the power of finance can be found everywhere.
We are a generation that is equipped to thrive in the digital age. Paper money, on the other hand, is an outdated analog technology. The digital version of anything has an exponentially larger impact than the analog version ever had. Combine the two and you’ll see that we’re on the verge of a new type of money that is not tied to the whims of men or the government.
Blockchain and the widespread adoption of smartphones have paved the way. What if we had a new type of money, one that is digitally native and whose supply flow is not regulated by the government? This is a radical proposal that many people would reject.
As a result, humanity is preparing for the digital economy, which is why the prices of Bitcoin, Ethereum, and other cryptocurrencies have skyrocketed in recent years, and now major corporations are investing in cryptocurrencies to prepare for the future. This technology’s door has already been opened.
Paper money was originally employed in China over 1000 years ago, and it was met with confusion and widespread condemnation. When large coin-based transactions became impractical, traders devised a system in which pieces of paper were inscribed with writing indicating their value. Transactions were concluded by passing over the paper note, and then the parties went to warehouses to exchange coins.
The early banks were warehouses that kept vast quantities of heavy coinage. The government outlawed the paper as its popularity grew, and then issued its notes as legal tender and the world’s first real national paper money was born.
Surprisingly, China has suddenly banned cryptocurrency, a thousand years after the initial paper notes were outlawed. It was not the government that invented crypto in the first place.
Could history repeat itself, with China producing a regulated cryptocurrency as it did a millennium ago? Words like Bitcoin, Ethereum, Dogecoin, and Alt-Coins generate frenzied reactions.
In these highly unpredictable years of COVID-19, quantitative easing, stock market explosions, populist governments, negative interest rates, Brexit, and catastrophic inflation forecasts, gold was anticipated to skyrocket, but it has hardly moved at all. It is worth about the same as it was in 2012. Bitcoin, on the other hand, has increased in value from less than $1 in 2012 to more than $30,000 today.
When things are tough, having someone in charge who can help the financial system react to shocks is beneficial. Many strategies are used in monetary policy to assist in managing and stabilizing the economy. These tools would be unavailable if all money was held in private crypto networks, and we would be on our own.
Many central bankers across the world are studying cryptocurrency to see if some of its benefits may be incorporated into central bank digital currencies. However, if they take too long to produce widely accepted cryptocurrencies, a growing portion of the population will place their trust in the private currencies devised by creative programmers.
Of course, private cryptocurrencies are fantastic, but it’s also comforting to know that central banks are also leading and innovating money, ensuring that crypto’s reliance on the private sector is not exclusive.
When it comes to the worth of money, the question is: who do you have more faith in: governments, precious metals companies, or computer programmers’ algorithms?
Nigeria is not turning a blind eye to the creation of new technological money in the face of overwhelming evidence. On September 24, 2021, the Central Bank of Nigeria (CBN) announced the website for its digital money, the e-Naira.
The digital currency was created as an alternative to more widely used currencies such as Bitcoins and cryptocurrencies in Nigeria.
The eNaira is supposed to have an app, but it’s not available right now. When opposed to cash payments, the e-Naira is meant to function as both a means of exchange and a store of value, enabling better payment prospects in retail transactions.
It features a one-of-a-kind operational structure that is both unique and unlike any other kind of central bank money.
As a legal tender, the digital currency has enormous possibilities, including the ability to boost the value of the Naira and raise government revenue due to the ease with which transactions may be completed, particularly across borders.
For the management of the e-Naira, the government must devise a well-thought-out structure to ensure that risks are effectively managed to safeguard the interest of the different stakeholders – individuals, businesses, government organisations, and financial institutions.
Most importantly, a nationwide awareness campaign programme is necessary to educate the users on protecting their data as well as the various channels available for them to report loss of device or any compromise of the eNaira speed wallet.
Fom Gyem writes from Wuye District, Abuja.
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