The International Monetary Fund (IMF) has warned that Nigeria’s eNaira CBDC may enable money-laundering and terrorism transfer. The risks increase, especially with the future expansion of the CBDC’s use to cross-border fund transfer and agency bank networks.
eNaira’s Benefits not Worth the Risk According to IMF
The IMF presented the warning in a new report after the 2021 Article IV Consultation with Nigeria. The IMF strongly believes the risk is imminent and could warrant lawsuits if the West African country does not address them.
Nigeria launched its CBDC in October 2021. It applies a tiered customer identification model with a precise daily transaction limit for each tranche. The lowest tier consists of customers in the unbanked population. This set can only transact up to $120 per day. On the other hand, the upper levels can transact between $487 and $2,438 daily.
The Central Bank of Nigeria promised benefits such as financial inclusion and ease of cross-border fund transfers with the introduction of the eNaira. However, the IMF did not see these advantages as worth the risk.
The institution identified certain cyber risks associated with Nigeria’s eNaira, which could be used to fund cross-border money laundering and terrorism. Apart from the cyber threats, the IMF also predicted unforeseen legal issues that may arise from using the Nigeria CBDC.
For instance, the institutions highlighted that the exact nature of the legal relationship between the wallet providers and the Nigeria CBDC holds is not precise. Litigation and operational risks may arise from such a grey area.
Nigeria to Improve its Anti-Corruption and Governance Efforts
The IMF directed the Central Bank of Nigeria to consider its recommended solutions to address the issues. Some of the IMF’s recommendations included that Nigeria improve its anti-corruption and governance efforts. It also suggested that country strengthen its AML regulations to avoid becoming a haven for tax evasion and financial terrorists.
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