e-Naira: Africa’s First Central Bank Digital Currency

By Ahmed

Dodo The Central Bank of Nigerian recently piloted the launch of eNaira on Monday 25 October 2021, setting a record, and making Nigeria the first country in Africa to launch its own central bank digital currency. It was a historical moment as Nigeria launched Africa’s first Central Bank Digital Currency (CBDC) The event was unveiled by President Muhammadu Buhari who could not hide his excitement during the unveiling at the State House. He pointed out that alongside innovation; the adoption of a CBDC could improve economic activities and increase Nigerian GDP by $29bn over the next 10 years. A visibly elated Buhari said. ‘’ I am delighted to officially launch the Central Bank of Nigeria digital currency called the eNaira. And in so doing we have become the first country in Africa and one of the first in the world to introduce a digital currency to our citizens.’’ The launch of the eNaira by Nigeria propelled its status positively to the world and demonstrated the country’s willingness to be the center of digital currency in Africa and one of the most recognized across the globe. And as rightly stated in a statement in October by Osita Nwasinobi, the Director of Communication of Central Bank, the eNiara no doubt marks a major step forward in the evolution of money in the country given the vast interest it has generated across the globe since its launching. Osita while explaining the theme of the eNaira ‘Same Naira, More Possibilities’, said ‘’The eNaira marks a major step forward in the evolution of money and the CBN is committed to ensuring that eNaira, like the physical naira is accessible by everyone’’. The launch of the eNaira has enticed many downloads with almost 600,000 downloads in less than four weeks according to Mr. Godwin Emefiele, the Governor of the Central Bank of Nigeria (CBN). The CBN Governor made the disclosure at the 56th Chartered Institute of Bankers of Nigeria (CIBN) Annual Bankers Dinner. He noted that building a robust payment system that would provide cheap, efficient, and faster means of conducting payments for most Nigerians has always been the focus of the central bank. ‘’ The growing pace of digitization globally, makes it essential that we leverage digital channels in fulfilling this objective’’. He said and also pointed out that the total transaction volumes using digital channels more than doubled between 2018 and 2020 as volumes rose from 1.3 billion to over 3.3 billion financial transactions in 2020. He further said that Digital payment channels also helped to support the continued conduct of business activities during the covid-19 lockdown. The eNaira as expected has equally attracted the attention of world business leaders and financial institutions across the globe. According to a report by Bloomberquin, a multinational global financial news company, Nigeria’s eNaira lured about half a million people weeks after its launch, with as many as 488,000 consumer wallets downloaded within its unveiling in October and customers conducted transactions valued at 62 million naira. The introduction of the eNaira by the CBN many financial analysts pointed out came at the right moment as its foray has attracted Nigerians away from cryptocurrencies which have been embattled in suspicious and controversies across the globe. What is eNaira? The eNaira is an electronic version of the Nigerian naira currency which is equal in value and strictly issued by the Central Bank of Nigeria (CBN) and projected to function as a safe and efficient alternative means of payment. The Central Bank Digital Currency (CBDC) known as eNaira differs from the controversial cryptocurrency as the eNaira is regulated and subject to banking laws. It is issued by a central authority and the CBN issued its regulatory guidelines since October. The CBDC is defined as a digital payment instrument dominated in national unit account and a direct liability of the central bank which makes it more reliable. The eNaira is not in coins and not in notes, it’s a virtual format stored in digital wallets and can be used for payment transactions and can be transferred digitally and at virtually no cost to anyone with an eNaira wallet. Simply explained on its website the eNaira is a Central Bank of Nigeria –issued digital currency that provides a unique form of money denominated in Naira. eNaira serves as both a medium of exchange and a store of value, offering better payment prospects in retail transactions when compared to cash payments. eNaira has an exclusive operational structure that is both remarkable and nothing like other forms of central bank money. Supports and expectations The introduction of the eNaira into the Nigerian financial system has received applauds from various financial quarters instilling a sense of hope on many digitally inclined entrepreneurs and other unbanked Nigerians. One principal aim of the digital currency is to boost inclusion with a plan to integrate millions of unbanked Nigerians into the banking sector. And according to reports about 55% of adult Nigerians were unbanked in 2020, an estimated 58m people, and of these, 35m own mobile phones and could easily be reached with mobile money. Already many financial experts have predicted that the eNaira will open a new window to financial transactions across the country. According to Ayowande Adaelemo, a fintech expert in an interview with Nigerian Channel Television, described the eNaira as a game-changer that will open a new world of innovations. ‘’ The most significant thing that would happen is that these people in rural areas will begin to see a huge difference between money in the bank and money in the hand but that is data. What this will do is that it will open a whole new world of innovation and I am hoping that mobile money operators and mobile network operators will latch into this and roll out innovative services to rural areas’’. He said An article by Jack Ree of the International Monitory Fund IMF African Department, in his ‘Five observations on Nigeria’s Central Bank Digital Currency’, noted that ‘’Nigeria has a large informal economy, with transactions and employment equivalent, respectively, to over half of GDP and 80 percent of employment. The eNaira is account-based, and transactions are in principle fully traceable, unlike token-based crypto-asset transactions. Once the eNaira becomes more widespread and embedded into the economy, it may bring greater transparency to informal payments and strengthen the tax base. Informal and formal businesses may also benefit if eNaira adoption enhances consumption through greater financial inclusion’’. One of the advantages of the eNaira is the target to boost transparency by allowing the regulators to effectively monitor currency transactions and curtail black-market trading in the paper naira. This and the digital currency is built on blockchain open ledger technology, which curbs fraud risk by making certain that every eNaira note is unique and cannot be duplicated or easily counterfeited. Suspicious and challenges The eNaira like every technologically propelled innovation has its own challenges as well. The idea of introducing digital currency into the Nigerian financial system suffered a delay at the initial stage over legal litigation bothering on trademark infringement, but a Federal High Court in Abuja finally gave the nod for the CBN to go ahead with the launch of the digital currency. Other challenges that have been identified since its launch and seen as an impediment to the effective use and success of the eNaira is the poor state of the Nigerian internet network. Internet users in Nigeria have since the venture of the internet across the globe been subjected to high pricing, poor network service delivery, and lack of access to rural areas where the giant telecoms companies always avoid because of their low economic returns. According to a report by Omaplex on eNaira which pointed out that ‘’ Since the purpose of the creation and launch of the eNaira is to promote financial inclusion, the unavailability of dependable internet could be a problem’’. The report said, “The lack of quality mobile networks and the limited spread of internet-enabled devices have been a significant bottleneck in the acceptance of the eNaira. This is so because, in most rural regions of Nigeria, network penetration is still heavily dependent on 2G and 3G networks, which spells difficulty for eNaira transactions hinged on the internet “ “If the primary stated purpose of the creation and launch of eNaira is to promote financial inclusion, the highlighted issues may pose a threat to achieving that goal,” the report added. The report also raised concerns about the number of Nigerians that owe mobile devices. The report said, “Owing to the indigent status of a significant fraction of the Nigerian populace, owning internet-enabled devices may be put on hold in favour of more immediate necessities.” The report also draws attention to the propriety of Nigeria acceding to international cybersecurity conventions. The report said, “In light of the decision of the United Nation’s General Assembly to design a new global treaty on cybersecurity in 2022, Nigeria must actively participate in the said deliberations as part of steps to ensure that it adopts the best global practices in ensuring cybersecurity.” The issue of cybersecurity in Nigeria raises more concern to financial experts and ICT professionals who fittingly pointed out the menace of the infamous Nigerian cybercriminals popularly known as ‘Yahoo Boys’, a group of unpatriotic Nigerian youths whose quest for quick money could jeopardize the growth and efficient usage of the eNaira as a medium of digital transaction across the country and the globe, including the current controversies that have trailed cryptocurrencies and its porosity. But the Central Bank of Nigeria has assured that the eNaira is more reliable than cryptocurrencies. The CBN Director of Corporate Communications, Nnamdi Okwuosa, said this at the CBN Fair in Aba and Ebonyi States in the apex bank sensitization programme. He described the eNaira as a legal tender issued by a sovereign nation and regulated by the Central Bank of Nigeria, while cryptocurrencies are unregulated. ‘’ Digital currency – eNaira is more reliable than cryptocurrency which is not regulated.’’ He pointed out at the fair themed: ‘ Promoting financial stability and economic development’, which afforded an opportunity for stakeholders and the public in the two states to understand the eNaira, currency operations, payment system management, development finance initiatives, and consumer protection. Okwuosa further assured that the CBN was constantly keeping an eye out for threats to Nigeria’s financial system, putting it at a vantage point when providing reliable economic advice and counsel that people should listen to the apex bank. He pointed out that losing money to scammers and unregistered financial institutions will be eradicated if people listen only to the bank and avoid unregulated institutions. Way forward Experts have also pointed out that since the eNaira is still new in the market it is of utmost importance that the Central Bank of Nigeria increase more awareness of the digital currency and ensure that its massages pass through the rural and urban centers more purposeful and effective. This they pointed out is the best way forward for digital currency and the most efficient way of sustaining the tempo of being the first African country to launch its own central bank digital currency. Written: Dec 29, 2022