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Zambia set to join Nigeria, Ghana in digital currency adoption

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The Bank of Zambia (BoZ) has revealed that the country may introduce a central bank digital currency (CBDC) in the formal financial system.

Nigeria’s central bank (CBN) earlier in February outlawed banks and financial institutions from transacting or operating in cryptocurrencies, saying they posed a threat to the financial system.

The CBN joined a growing list of emerging markets betting on digital money to cut transaction costs and boost participation in the formal financial system.

Zambia will join Nigeria and Ghana as pioneers of digital money in the African continent.

According to BoZ acting assistant director of communications, Nkatya Kabwe, the bank has been conducting feasibility studies on CBDCs and would be completing them soon.

Mr Kabwe told Bloomberg that Zambia seeks to improve this and boost its economy by launching a CBDC.

He explained that the central bank believes that a CBDC could increase traceability, safety, and efficiency of the country’s payment systems.

Mr Kabwe expects the bank to complete this study by the fourth quarter of this year.

“The results of the research will form part of the input in the policy considerations on whether to introduce a central bank digital currency in Zambia,” he told Bloomberg.

However, the central bank recently issued a warning against digital currencies, reminding the public that it doesn’t recognize them as legal tender.

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Tax evasion trial of Binance executives postponed until June 14 by Nigerian court

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A Nigerian court Wednesday postponed the tax evasion case against Binance until next month, when the cryptocurrency exchange and two of its officials might potentially be charged, according to the judge.

Authorities were unable to bring U.S. citizen and Binance head of financial crime compliance Tigran Gambaryan to court, which caused the case to standstill. Gambaryan did not give a justification for missing the courtroom.

An Abuja court decided on Friday that Gambaryan, representing Binance, may go to trial in the tax evasion case. In May, Binance CEO Richard Teng charged that Nigeria was creating a hazardous precedent when its executives were invited to the nation and subsequently taken into custody as part of an anti-crypto campaign. The business is contesting the proceedings because it is accused of money laundering and tax evasion.

Four charges of tax evasion are brought against Binance and its executives, Gambaryan and Nadeem Anjarwalla, a British Kenyan who serves as Binance’s regional manager for Africa. One of the charges is failing to register for taxes with the Federal Inland Revenue Service of Nigeria.

Despite Anjarwalla’s March escape from detention, the lawsuit still lists him as “at large,” which might delay the trial because Nigerian law mandates that all parties must be served before the case can move forward, according to Chukwuka Ikwuazom, the attorney for Gambaryan.

Moses Ideho, a revenue service attorney, stated that Gambaryan should have been brought before the court by the Nigerian jail service and that he was unaware of the reason for his absence. The potential arraignment of Binance and Gambaryan has been postponed until June 14 by Judge Emeka Nwite.

The Economic and Financial Crimes Commission (EFCC), Nigeria’s anti-graft agency, has charged Binance and the executives with laundering over $35 million in addition to the tax evasion case. On Thursday, there will be a money laundering trial. In the wake of Gambaryan’s detention, Binance has declared that it is closely collaborating with Nigerian authorities.

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Private sector concerned as Nigeria’s central bank raises interest rate to 26.25% 

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The decision of Nigeria’s central bank’s Monetary Policy Committee to raise the country’s benchmark interest rate has alarmed members of the organized private sector and economists alike, some of whom believe it will severely impair the ability of business operators to repay their debts.

The decision of the committee was declared by Olayemi Cardoso, the governor of the Central Bank of Nigeria and chairman of the MPC, after the latter’s 295th meeting on Tuesday.

The interest rate was increased by 150 basis points by the MPC, from 24.74% to 26.25%. The benchmark interest rate increased for the third time this year on Tuesday with the MPR boost.

The policymakers raised the MPR by 750 basis points since the MPC reconvened in February. In February, the MPR jumped from 18.55% to 22.75%, a 400 basis point rise. In March, it was raised by 200 basis points to 24.75%.

Cardoso said, “The key focus of the MPC at this meeting remained to achieve price stability by effectively using tools available to the monetary authority to rein in inflation. Members observed that while year-on-year headline inflation in April 2024 rose moderately, the month-on-month measures of headline, food and core all declined significantly. This follows a decline (month-on-month) of headline and food measures in March 2024, suggesting that the recent tight monetary policy stance of the Bank is beginning to yield the desired outcomes.”

Cardoso added, “For the first time since October, we have seen a relatively significant moderation in the rate of increase and that is working. I believe very strongly that the tool that the central bank is using is working. I have said it before, there is no magic wand, these are things that need to take their own time. I’m confident and the figures show that we are beginning to get some relief and I believe in a couple of more months, we will see some positive reports on the effects of what the CBN is doing.”

Cardoso defended the decision to raise the MPR once more during a press conference on Tuesday following the MPC meeting. In the face of an uncertain economic environment, the MPC has remained hawkish in its approach to combating inflation.

Nigeria’s inflation rate increased to 33.69% in April. As compared to the headline inflation rate for March 2024, the National Bureau of Statistics reports that the headline inflation rate for April 2024 increased by 0.49 percentage points.

According to the NBS, the headline inflation rate increased by 11.47 percentage points year over year from the 22.22% rate reported in April 2023. In April 2024, food inflation was 40.53%. Cardoso stated that the MPC has connected the ongoing naira volatility to the principles of the free market.

“Members further observed the recent volatility in the foreign exchange market attributing this to seasonal demand, a reflection of the interplay between demand and supply of a freely functioning market system. The committee also noticed the marginal increase in the foreign reserve between March and April 2024,” he said.

Segun Kuti-George, National Vice Chairman of the Nigerian Association of Small-Scale Industrialists, denounced the Interest Rate Increase by MPC. At a time when many firms were depending on loans to operate, Kuti-George argued it was callous to keep rising interest rates.

He said, “That is the only thing they know. The only thing they know is to increase the interest rate. As long as the industrial sector cannot access cheap funds, we are joking. We cannot be talking about economic development.”

In addition, Gabriel Idahosa, the president of the Lagos Chamber of Commerce and Industry, who disagreed with the rate hike, charged that the CBN was employing the incorrect measure to combat inflation.

Idahosa said, “The CBN is like a farmer that does not have any other tool. So, they are stuck with one tool. We just came out of a consultation session and this was the issue. The CBN is driving a metric that is not related to the problem.

“The problem is the cost of production. It has nothing to do with interest rates. It is not advisable to keep raising the interest rates, but they have run out of ideas and they don’t want to be seen to do nothing.”

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