IMF sounds alarm over Nigeria CBDC money laundering risks
The International Monetary Fund (IMF) has warned that Nigeria’s central bank digital currency (CBDC) could create financial stability risks.
In October, Nigeria become one of the first countries in the world to launch a CBDC with the roll out of the eNaira. In a consultation on the issue published today the IMF stressed that “significant integrity risks” could arise from the wide accessibility of the eNaira and deficiencies in the country’s anti money laundering framework.
Staff at the IMF “agreed that while the newly launched eNaira could help foster financial inclusion and improve the delivery of social assistance, close monitoring of associated risks will be important.” The international financial body called for further efforts to address deficiencies in Nigeria’s anti money laundering framework and an assessment of the terrorist financing risks posed by domestic and cross-border uses of the CBDC.
Initial take up of the digital currency, which was launched to improve financial inclusion, increase remittance inflows and reduce informality in the economy, was strong with about half a million people downloading the consumer wallets in the first two weeks.
The IMF said that the popularity of the eNaira could itself be an issue because it risks disintermediation of the financial system if consumers swap commercial bank deposits for CBDC holdings.
The consultation further warned that an evaluation report by the Inter-Governmental Action Group against Money Laundering (GIABA) identified significant deficiencies that could result in a Financial Action Task Force (FATF) grey listing as early as next year for Nigeria, a move which would have broad implications for the economy.
The authorities have placed pressure on Nigeria to create a national committee to help develop an anti money laundering action plan.
Read more: Nigeria launches eNaira amid worldwide interest in digital currency