The news cycle in Nigeria is rarely short on irony, and this week’s announcement of a new stablecoin, the cNGN, takes the cake. Launching on February 27th, 2024, this digital currency comes amidst the naira’s spectacular nosedive – one that saw it plummet by a staggering 40-67% in 2023 alone. The World Bank even branded it one of Africa’s worst-performing currencies, but that’s only half the story.
While you might expect Zimbabwe’s long-suffering dollar to take the “Worst Currency” crown, Nigeria’s recent freefall has grabbed all the attention. Its rapid devaluation hasn’t been a slow burn like Zimbabwe’s, but a dramatic crash in a single year, leaving everyone wondering – can a stablecoin really save the sinking naira?
Stablecoins, by definition, are supposed to be immune to such volatility. They’re tethered to stable assets, like the US dollar, offering a much-needed anchor in stormy financial seas. But the problem is, the naira hasn’t been anywhere near stable lately. So, it’s like launching a life raft from a leaky ship without fixing the holes first.
And that’s not the only reason for skepticism. Nigeria already has a digital currency in its arsenal – the eNaira, Africa’s first CBDC, launched in 2021. With promises of boosting remittance inflows, border trade, and financial inclusion, it seemed like the answer to many prayers.
But two years later, the eNaira is more of a faint whisper than a booming success story. It barely registers on the financial radar, accounting for a measly 0.5% of Nigeria’s circulating currency. Why the underwhelming performance? A whole cocktail of reasons: limited use cases, a tech-averse public, and frankly, bad technology.
So, will the cNGN fare any better? The Central Bank (CBN) claims its collaborative creation with commercial banks, unlike the eNaira’s purely central control, will boost interoperability. But that optimism doesn’t erase the echoes of eNaira’s failure. The same pitfalls – limited uses, lack of awareness, and technological hiccups – seem poised to engulf the cNGN as well.
Ultimately, the cNGN launch reeks of throwing another log on the digital currency fire without addressing the underlying fuel: a struggling naira desperate for stability. Whether it succeeds or fizzles out like its predecessor remains to be seen, but one thing’s for sure – the irony of launching a stablecoin for a volatile currency isn’t lost on anyone in Nigeria.
Source: TechCabal