A consortium consisting of several banks, fintech companies, and blockchain companies in Nigeria is developing a stablecoin called cNGN, which will be pegged to the country’s fiat currency, Naira. The stablecoin is planned to be launched in 2024 and will be recognized as legal tender.
According to Forbes, the consortium, which includes major Nigerian banks such as First Bank, Access Bank, Sterling Bank, and Providus Bank, as well as payment companies Budpay, Kora, Interswitch, and blockchain advisory company Conexity and Interstellar, aims to facilitate seamless cross-border transfers of Naira.
While the concept of a stablecoin tied to Naira has been circulating for years, the recent experiment was the NGNT launched by the Token Mint Alliance in 2019. NGNT, which was backed by major cryptocurrency exchanges in Nigeria and the African community, was pegged 1:1 to Naira and issued on the Binance Smart Chain and Ethereum, but it was not considered legal tender.
However, cNGN will be different. It will be a compliant stablecoin issued by a regulated consortium and pegged 1:1 to Naira. The stablecoin will be held by Nigerian banks and recognized as legal tender. The consortium’s partners, including the aforementioned banks and payment companies, as well as blockchain advisor company Conexity and Interstellar, will work together to develop cNGN.
Despite these developments, there are still many unknowns about cNGN that need to be clarified by the issuing party. This includes the choice of blockchain technology and the applications and services that the stablecoin plans to offer to consumers.
It is worth noting that Nigeria’s central bank had already launched its central bank digital currency (CBDC) called “eNaira” in 2021. However, cNGN differs from eNaira as it is created using blockchain technology and will be maintained by the consortium, with the banks within the consortium holding it. The central bank of Nigeria will play a supervisory role alongside the country’s Securities and Exchange Commission. The potential impact of cNGN on monetary policy and foreign exchange may be more significant compared to eNaira, especially considering the recent lifting of the Bitcoin ban by the central bank of Nigeria and the issuance of new digital asset guidelines.
By 2024, Nigeria will have four different forms of Naira in circulation, including NGN, eNaira, cNGN, and new and old Naira notes. This is expected to have implications for Nigeria’s monetary policy, foreign exchange controls, and overall market dynamics.