One year of digital currency in Nigeria
The eNaira was launched and activated on 25 October, 2021 by President Muhammad Buhari, under the slogan: “Same Naira, More Possibilities” has enhance the enconomy with digital currency traffic among Nigerians.Pertinently, the digital currency which was litmus test of the apex bank makes Nigeria the first country in Africa and one of the first in the world to introduce digital currency.
Some of the benefits among other things, eNaira seeks to address some of the challenges confronting monetary authority including inflation, by reducing the amount of physical cash in circulation and drastically cutting down the cost of currency production.
Right at the unveiling of eNaira, the CBN Governor, Godwin Emefiele had made it clear that the digital currency launch was not a one-off event as there would be more innovations that will emerge from its adoption for the benefit of the economy. He described eNaira as timely and strategic in complementing various diversification and digitisation initiatives of the Federal Government including the launch of the Nigeria Digital Economy Policy and Strategy (NDEPS), the National Broadband Strategy, as well as the introduction of the Start-Up Bill and a host of others.
The growing interest in CBDC around the world, the CBN had commenced extensive study, consultations, identification of use cases, and the testing of the CBDC concept in a sandbox environment as far back as 2017, stressing that the objective of the research was to establish a compelling case for the adoption of a digital currency in the country to enable a more prosperous and inclusive economy for all Nigerians. At the opening of the Grand Finale of the eNaira Hackathon in Abuja some months ago the CBN hinted that eNaira had recorded over 200,000 transaction volumes valued at N4 billion since the platform was launched by Buhari in October 2021 adding that Nigerians, both banked and unbanked, will be able to open an eNaira wallet and conduct transactions by simply dialing the Unstructured Supplementary Service Data code (USSD) *997# from their phones.
The CBN also posited that the eNaira had reached 840,000 downloads, with about 270,000 active wallets comprising over 252,000 consumer wallets and 17,000 merchant walleta. The merchants and consumers with bank accounts can use the NIBSS Instant Payment (NIP) to transfer and receive eNaira to any bank account, adding that this will further deepen the integration of the eNaira with the existing national payment infrastructures.
In November 2021, the apex bank said it slashed expenditure on currency printing from N75.52 billion in 2019 to N58.61 billion in 2020, representing a decrease of N16.91 billion or 28.84 per cent compared to the preceding year.
According to the annual report by the apex bank’s Currency Operations Department (COD), currency printing gulped N64.04 billion in 2018. In April 2021, the National Bureau of Statistics (NBS), reported that a total volume of 3,464,811,083 transactions worth N356.47 trillion was recorded on electronic payment channels in the fourth quarter of 2020 (Q4 2020).
Instructively, online transfers dominated the volume of transactions with over 2.23 billion volume of transactions valued at N120.27 trillion in the review period.
The CBN Governor had yesterday in Lagos disclosed on the first anniversary of the currency that the eNaira has recorded over 700,000 transactions worth N8 billion after one year of its launch.
The Apex bank also revealed that after one year of Digital currency, over 3,305 merchants have successfully registered on the eNaira platform across the country including Shoprite, Sahad Stores, A.A. Rano filling stations, Fraser Suites, November Cubes, among others. Other milestones achievement of the eNaira show that 33 banks are fully integrated on their platform, N3.00 billion has been successfully minted by the Central Bank, and N2.10 billion has been issued to financial institutions. There are over 2.5 million daily visits to the eNaira website.
Though, it is advantageous that the digital currency issued by a government works differently from cryptocurrency like Bitcoin. e-Naira has legal backing as it is virtual money issued by government authority. In this sense, it is better than Cryptocurrency because crypto is a private and unregulated virtual money. The e-Naira will aid financial inclusion and propel a cashless policy. Unbanked individuals can open and hold e-Naira wallet without having a bank account.This is one of the outstanding advantages of CBDCs. Till today, majority of Nigerian population is unable to access financial services. Examples of rural areas in Nigeria without any physical location of deposit money banks, financial service operators clearly show restrictions on access to bank accounts. Honestly speaking, many banks are not quite eager to reach such regions with their services.
This digital currency will allow easy transaction but it is different from any other digital currency because it will be issued by a sovereign authority, which is the CBN. Digital Naira could ensure easy access to a financial system with low costs and assurance of better efficiency. The low-cost payment system facilitates transfers between individuals and customers to business through smart phones without holding a bank account. The benefits of digital naira can ensure that people could experience new perspectives on accessing financial services.
However, there are some shortcomings of the eNaira to put the record straight. For instance, the eNaira will not grow in value like Bitcoin and other digital currencies. Although, the e-Naira being pegged to the value of the fiat Naira makes it stable and non volatile, it will make it unattractive to people who want a digital asset as form of investment that can yield profits.The money held in e-Naira wallet will not accrue any interest to the holder unlike Naira held in conventional bank savings account. As money held in the digital Naira e-wallet is basically for transactions, settlements and payments, it may trigger extravagant spending.The rise in internet banking, digital currency and digital payment system has given rise to cybercrime as well. e-Naira will expose more people to the risk of stolen passwords, hacked accounts, internet banking frauds, etc. With the introduction of Central Bank Digital Currencies, there will be a more innovative way for fraudsters to swindle and divert people’s money. The people at the rural areas are more at risk.
Another pressing challenge of the eNaira is related to the huge gap in the financial literacy among Nigerians perhaps due to ignorance and nonchalant attitude towards online banking. The CBN and the bankers Committee has a huge responsibilities of taking financial literacy to people to enshrink this vacuum of the masses keying into this digital banking. Efforts should also be made to invest in technology that will counter attacks by cyber criminals. eNaira has come to stay, it is now the responsibility of the government at all levels to back the CBN with friendly policies that will boost incountry transactions.
