The Nigerian Exchange plans to integrate blockchain technology into its operations by 2023. The exchange believes that integrating the technology will draw young investors who have become increasingly interested in digital assets and blockchain.
Popularly known as NGX, the exchange is a leading trading and listing venue in Africa and offers stocks, exchange-traded products, mutual and other investment funds, fixed income securities, and more.
NGX will deploy blockchain to settle capital market transactions, CEO Temi Popoola told Bloomberg in an interview.
“For a lot of young and upcoming Nigerians, that is the kind of technology they adopt and we want to see how we can deploy it to grow our market,” he told the outlet.
The exchange will join many stock markets and other financial market infrastructure firms worldwide deploying the technology for settlement. The Hong Kong Stock Exchange, Australia’s ASX stock market, and the Depository Trust & Clearing Corporation are among some of those pioneering in blockchain integration.
Once integrated, the end user never has to know that he relies on blockchain as it’s a backend technology. However, it eliminates counter-party risk, enhances security, and improves settlement speed, but only if the exchange chooses a blockchain network that scales massively like the BSV enterprise blockchain.
Following the integration of blockchain to settle capital market transactions, NGX plans on exploring other use cases for the technology, the CEO told Bloomberg. He believes that aside from the security and speed, blockchain will attract young investors who are increasingly looking to the digital assets market to diversify their investments.
“Blockchain technology can facilitate different parts of the capital market, whether around creation of products or facilitation of the Exchange to trade financial assets,” Popoola stated.
Blockchain, not ‘crypto’
But it may not be as smooth sailing as NGX expects, one tech expert believes. Gbemisola Alonge, a tech policy analyst at Stears in the capital Lagos, says that blockchain technology may be tainted by its almost-synonymous association with cryptocurrencies, which the government and the Central Bank of Nigeria (CBN) have been against for years now.
“It’s almost impossible to think of blockchain without including cryptocurrency, so if the adoption is not in agreement with central bank’s position, there may be skepticism from investors,” Alonge told Bloomberg.
Alonge’s sentiments reflect a widely-held misconception that one can separate blockchain technology and digital assets. While it’s true that there are ways to avoid relying exclusively on a volatile digital currency, such as through native stable tokens, the entire system depends on the digital currency.
As MRHB DeFi Chairman Khalid Howladar told the audience at the BSV Global Blockchain Convention, if that’s your outlook, “you’re missing 50% of the value of blockchain. Otherwise, it’s just a glorified database.”
In Nigeria, blockchain and digital assets are already infiltrating the financial and payments industry. The government launched the eNaira CBDC last year, seeking to finally solve the challenge of financial exclusion.
While launching the eNaira, President Muhammadu Buhari said that adopting blockchain and the eNaira “can increase Nigeria’s GDP by $29bn over the next 10 years.”
However, not many organizations have adopted blockchain since then, and if it’s successful in its plan, NGX will become the first major institution in the West African country to be operating on the blockchain.
The eNaira hasn’t fared better either. According to the most recent media reports, the eNaira app has been downloaded about 700,000 times, an underwhelming number for a country with a population topping 200 million, half of whom are connected to the Internet.
And even those who have downloaded and used the eNaira app have a few good things to say about it. On the Google Play Store, it has a rating of 2.9 out of 5, and ranks even lower on the Apple App Store.
So far, the eNaira has remained a the purview of the educated and employed, the very group of people who were already banked. Many small business owners are not even aware of the CBDC or know very little about its use cases, an Al Jazeera report polled several dozen such businesses found.
Watch: The BSV Global Blockchain Convention panel, Blockchain in Africa
New to Bitcoin? Check out CoinGeek’s Bitcoin for Beginners section, the ultimate resource guide to learn more about Bitcoin—as originally envisioned by Satoshi Nakamoto—and blockchain.