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Nigeria wants to power its ‘new’ digital economy using blockchain

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Nigerian waving flag

Nigeria wants to become Africa’s digital economy capital by 2023,  according to the country’s Minister of Communication and Digital Economy, Dr. Isa Ali Pantami. The government of Nigeria disclosed its plans of transitioning the country into a new, effective digital economy through the adoption of the distributed ledger, blockchain technology. This was confirmed in a recently released draft from the National Information Technology Development Agency (NITDA) titled “National Blockchain Adoption Strategy”. 

The document contains a roadmap for the country’s general adoption of digital technologies, particularly the blockchain network which would be used in facilitating crypto trades across the country and ultimately bring the country into the long awaited digital economy.

The Nigerian government had earlier voiced skepticisms concerning the appeal of digital currencies and the underlying blockchain technology and have attempted to place a ban on it. 

Over the years, the country’s SEC and other financial regulatory bodies, have constantly warned citizens about the inherent risks of investing in digital assets. At some point, digital currencies were declared as non-legal tender. 

However, the country began to experience a gradual change in stance from the government and financial regulators. In 2019, Nigeria saw a varying degree of acceptance in the aspect of digital technologies and assets, some of which include the fintech report. This report comprises recommendations with respect to digital currency. Closely followed by this, came a call for a legal framework to regulate the use of digital assets. This led to the creation of a committee which is aimed at setting up a proper regulatory framework for digital assets. 

In September 2020, regulators demonstrated a bigger interest in legislating the crypto space. This was confirmed in an SEC statement that was released. The statement documents outlines on how crypto assets would be regulated based on how they are classified. 

The national blockchain adoption strategy.

Digital currencies have seen widespread recognition as many have realized the variety of advantages connected with its application, which cuts across operation cost reductions to the improvement in the efficiency of business processes. 

As part of an effort to move Nigeria away from its huge economic dependence on the oil and gas sector, and into a simpler economy steered by digital technologies, President Muhammadu Buhari has intensified interests in regulating the blockchain technology. The NITDA was put in place to facilitate the government’s statutory obligations towards these emerging techs, with a major role of coming up with corresponding strategies for ensuring a healthy ecosystem. 

The federal government aims to provide the trust necessary for the achievement of an efficient, safe, and most importantly, productive digital Nigeria. In light of this, the government has shown a high level of interest in creating and enforcing regulations to direct the adoption and use of digital technologies. This would ensure fair markets as well as the protection of citizens while letting innovations and businesses flourish. 

The primary objective of the Nigerian Blockchain Adoption Strategy is to identify and make good use of the opportunities provided by blockchain technology, in order to strengthen the growth of the country’s economy. 

The draft emphasized the several key areas that would be focused on. The areas include regulations, skills and capacity building, innovation, investment, collaboration, and internal competitiveness, with more emphasis on the regulatory approach which promises to be one that encourages innovation and development. 

Objectives and incentives

The proposed strategy for the adoption of blockchain, is built on the following 6 key initiatives developed from the 8 pillars of Nigeria’s Digital Economy Policy And Strategy (2020-2030)

  • Establishing the Nigerian Blockchain Consortium
  • Regulation and legal framework
  • Provision of a national Digital Identity framework
  • Creation of blockchain business incentives
  • Promoting Blockchain digital literacy and awareness
  • Establishment of a National blockchain sandbox. 

Also, the following 5 strategic objectives were outlined in the document.

  • Establishment of a blockchain regulatory oversight
  • Stimulating innovations and entrepreneurship
  • Building security, trust, and transparency in value chain
  • Enabling better investment opportunities and job creation
  • Governance. 

“The goal of this strategy is to key into the Economic Recovery and Growth Plan of the Federal Government by increasing the contribution of ICT to the Gross Domestic Product (GDP).”

The strategy framework aims to propel the adoption of blockchain technology in public administrations across the country, while converting the economy into a digital productive one. As a result of this, we hope to see improvement in efficiency, transparency, governance as well as new job opportunities. 

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Crypto Assets

Crypto prices drop as global market fear increases

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Top cryptocurrency prices have fallen amidst a drop in stocks and fears over China’s Evergrande debt crisis. In the last 24hour, Bitcoin dropped from $47,772 to $42,630 shedding about 8.58%. this is the lowest in price since another bull run began on Sept 5 after the April crash.

El- Salvador’s President, Nayib Bukele sees the fall as an opportunity to invest more. Recall that the country adopted Bitcoin as a legal tender on September 7. Despite the adoption, the price of Bitcoin has fallen by almost 14% since then.

Other coins have experienced dramatic crashes within the last 24hours. Solana, a coin that has experienced 355% growth within the last 3 months fell from $162 to $130 shedding about 11.39% within the last 24hours. Solana’s fall may be categorized by the 17-hour outage which the founder, Anatoly Yakovenko said was caused by bots “flooding the networks”

Ethereum fell by 9.37% while Dogecoin and Axie Infinity fell by 11.22% and 14.14% respectively within the last 24hrs hours. While crypto experiences dark Monday, El-Salvador keeps investing more money in Bitcoin.

A look at the global market

The global market is experiencing fear due to the Evergrande debt crisis. A report published by the University of Michigan shows that consumer’s sentiment is beginning to decline. This trend alone may impact the crypto market as well.

On the other hand, the global market downturn must have been spurred by the Evergrande debt crisis. The company grew to be one of China’s biggest companies by borrowing more than $300bn. Last year, Beijing made rules to control the debt owed by big real estate developers. This led Evergrande to offer its properties at major discounts to raise more money to keep the business afloat. Right now, the company is struggling to meet the interest on payment of debts.

Why would it matter if Evergrande fails?

The collapse of the multi-million dollars company would affect the global market; including the crypto market. Many people bought properties from Evergrande and they expect to make gains. If Evergrande falls, crypto investors will be forced to withdraw more money to keep their business running without the means to invest more. When one business fails, the other gets affected indirectly. This also applies to other firms that do businesses with Evergrande.

The potential impact on China’s financial system is another effect of Evergrande’s fall. In his statement to BBC, Mattie Berkink, the Economist Intelligence Unit (EIU), said that “the financial fallout would be far-reaching. Evergrande reportedly owes money to around 171 domestic banks 121 other financial firms” if the company fails, other lenders or businesses may be forced to lend less. Thereby leading to a credit crunch- a situation where companies struggle to borrow money.

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Bitcoin in Africa

The rise of CBDC in African economies

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Many nations have taken cues from the world of crypto and its resounding successes over the last decade. In order to avoid getting left behind, governments worldwide are increasingly turning their attention towards implementing some form of digital currency, a CBDC which in full is Central Bank Digital Currency. Although inspired by cryptocurrencies, CBDC’s are quite different from traditional crypto platforms. The main differences are that CBDC’s are unlikely to be decentralized, the supply of this currency regulated by the host’s country’s central bank as the CBDC is designed to operate as a sovereign legal tender, the digitized form of the host country’s fiat currency. Thus, a central bank may issue digitized tokens of its currency of which their value is pegged to the fiat currency of the nation in question, making CBDC’s stablecoins.

Africa has seen a rise in the use of cryptocurrencies and it’s still pushing frontiers in this sector. Although the use of crypto in many African nations is becoming more and more pervasive by the day, the tone of governments in many of these countries toward the sector is cautious at best and threatening at worst. However, a few nations have voiced interests in creating digitized versions of their legal tender to function as a CBDC. Amongst these are Ghana, Nigeria, Morocco, Kenya and Tunisia.

Many of these projects are still in the research phase or developmental phase however. A good example is Ghana’s proposed CBDC, the E-cedi being developed in partnership with German company, Giesecke + Devrient. Nigeria’s CBDC project, the eNaira has been announced and according to Nigeria’s central bank, this CBDC will be launched sometime in 2021. To that end, the CBN has partnered with fintech company, Bitt Inc. to serve as the technical partner in the eNaira’s development. Reportedly, the CBN had made the decision to digitize the Nigerian Naira in 2017.

While the pursuance of digital currencies in African nations is a welcome development, implementation of these schemes isn’t without challenges. Chief among the issues countries in Africa face would be the already existing financial service inequality and poor penetration of internet access in the continent. These challenges must be tackled in order to allow for mainstream adoption of CBDCs and the subsequent provision of financial inclusion. The benefits largely depend on the peculiarities of the nation deploying them. For instance, a digital currency is thought to help Nigeria increase foreign remittances, it’s second largest source of forex after oil. Whatever the outcome of these projects, it is becoming apparent that CBDC’s have come to stay.

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Bitcoin trades above $51k ahead of El Salvador’s adoption

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Bitcoin growth

Bitcoin price has rallied above $51,000 ahead of El Salvador’s adoption. The immediate surge in price may be due to the social media campaign that everyone should buy sats of Bitcoin to support El Salvador’s plan to make the coin a legal tender or it may be due to the news of El Salvador’s adoption of the coin as a legal tender on September 7. Users of social media platforms like Twitter and Reddit are discussing how they will buy Bitcoin of $30 each to mark the new El Salvador Bitcoin law.

The surge in Bitcoin’s price began in the last 24hrs with the price rallying around $51,955 with a 3.37% increase. This is an all-time high after the April crash that brought the price of Bitcoin from $64k down to $28k. The move by El Salvador to be the first country that accepts Bitcoin as a legal tender and the social media campaign that leads to a surge in price ahead September 7 are a repetition of events that occurred late last year and early this year with regards to institutional investors and how the price of Bitcoin skyrocketed.

El Salvador, a country in Central America, has been preparing heavily to adopt Bitcoin by installing ATMs to allow citizens to convert the token into US dollars. Last week, the country’s Legislative Assembly passed a law to allow for the creation of a $150m Trust to support the conversion of Bitcoins to US dollars.

To promote the use of Bitcoin, the government states that it will give the adult population of El Salvador $30 in Bitcoin once they download “Chivo” the wallet issued by the government. This was confirmed by the Finance Minister, Alejandro Zelaya.

What this means for Bitcoin investors

Apart from the adoption by Salvadorians, on-chain analytics show that Bitcoin is in high demand. The fourth halving that occurred will make Bitcoin become a scarce token in the nearest future. Thereby increasing the price sporadically.

With El Salvador’s interest in Bitcoin, other countries are likely to follow suit- Panama is considering following El Salvador’s lead. History will repeat itself as this development will serve as another crypto rout that occurred early this year when Tesla and MicroStrategy announced their support for Bitcoin.

El Salvador’s new law allows the use of Bitcoin as a legal tender it can be used to buy goods, pay for taxes and bank loans. This means more demand for Bitcoin, with the fourth halving that occurred, it means less supply. A common rule of economics for demand and supply will apply. Prices are projected to keep rising. At the time of writing this report, Bitcoin is trading at $51,839 with a projection of $52k before the end of today and higher tomorrow when Salvadorians begin to use the token.

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