Research Document: Monetary Policy in an Era of Digital Money: New Insights for Nigerian Policymakers

Posted Wed, Nov 29, 2023 10:54 AM

In today's globalised world, cross-border payments are essential for seamless trade and financial integration, particularly in regional trade agreements such as the AfricanContinental Free Trade Area (AfCFTA). However, the high cost and limited accessibility of cross-border payments remain significant obstacles. For instance, remittance fees can consume up to 7% of the transaction amount, twice the Sustainable Development Goals(SDGs) target, disproportionately affecting countries with large unbanked populations, greater reliance on remittances and less liquid forex markets.
The current trend of digital infrastructures and platforms such as blockchain technology, artificial intelligence (AI), machine learning, deep learning, e-commerce and the Internet of Things (IoT) have the potential to revolutionise cross-border payments and global financial integration. However, there are concerns about the impact of these technologies on monetary policy formulation. The question remains whether digital money can address the issues of financial integration and cross-border payments without disrupting the effectiveness of monetary policy. Thus, this brief provides insights into the future of monetary policy in Nigeria in the era of digital money. It explores the potential impacts of digitalisation on monetary policy formulation and offers recommendations on how policymakers can leverage the benefits of digital money to promote financial inclusion and price stability while mitigating potential risks.