Nigerians seem to readily embrace anything that has no government interference in it. Ponzi schemes and crypto trading are good examples of such activities widely welcomed by Nigerians because they trust more in a system free from government nosiness and control.
Basically, Nigerians have lost faith in their sovereign regulators.
The announcement of the digital naira has also proved, once again, that Nigerians want nothing that has any element of central authorisation. Since the cryptocurrency was taken away from the citizens, why should the central monetary authority propose a digital monetary system that mimics the erstwhile unapproved cryptocurrency that runs on the novel blockchain technology, many ask?
Nigeria’s largely youthful population, together with a highly compelling digital economy, relied on its largely unstable currency and high remittance activity to embrace the much-spoken cryptocurrency alternative to other forms of investments. Since the economy is mainly informal and unstructured, the decentralised nature of crypto trading and investments took the nation by storm, and Nigerians quickly embraced the system in a short period.
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With the government’s subsequent ban on crypto trading, a replacement was promised, which has led to the announcement of the e-naira, which is currently heralded by the nation’s apex banking authority.
The e-naira, according to the Central Bank of Nigeria (CBN), is a legal tender that will run concurrently with the paper naira and will have a non-interest bearing CBDC status. The digital currency will hold transaction limits for customers, which will be value-based.
The CBN recently announced a 5-stage categorisation for the e-currency holders, indicating the extent of currency holding and limits on transactions per tier for the various customers.
The CBN announced that tier-one customers or wallet holders will be allowed a maximum transfer limit of fifty thousand naira daily and a cumulative balance of three hundred thousand naira per day. The daily transfer limit will stand at two hundred thousand naira for tier two wallet holders, while the cumulative balance will be five hundred thousand naira per day.
Those in the tier three wallet category will be allowed a daily transaction cap of one million naira and a cumulative daily balance of five million naira. The CBN assures that no transaction fee will be charged for the various transactions.
The e-naira system has been announced to commence on October 1, 2021.
To gain the trust of the already dismayed Nigerian populace, the CBN has assured that transactions with the e-naira will be easy and seamless since it will be issued by the monetary authority. Also, the CBN made it clear that the digital currency introduction will help promote financial inclusion in the country.
The e-naira is also announced to be backed with the physical naira, and its value is set to be pegged to the physical naira and so will operate like a stablecoin.
Furthermore, the e-currency is set to operate as a legal tender for the country. It will have a non-interest bearing central bank digital currency status, a transaction limit for customers and a value-based transaction limit.
Despite the assurances given by the apex monetary authority about the safety and sustainability of the e-naira, many Nigerians are not finding it easy to agree with the government on the new payment system.
Nigerians are mainly unsure about the true intentions of the government with this cryptocurrency replacement. Many people see e-currency as an alternative to the much embraced but outlawed bitcoin, only this time, the government plays the piper. Since e-currencies are directly controlled at the centre, transactions that are not in favour of government interests can be easily monitored. The funders are exposed to any repercussions from such actions. The #EndSars scenario still plays fresh in the memory of many.
Although the CBN has announced that the e-naira will be backed by the physical currency, many fear that the volatility of the paper money will contaminate the expected stability of the e-currency. Also, many Nigerians find it uneasy about anticipating a well-managed e-system given the CBN’s current scorecard on the fiat monetary system management. Will a poorly managed physical naira system suddenly gain competence within a digitally controlled ecosystem?
Another angle of scepticism lies within the technological viewpoint: how will the CBN manage the technical compatibility and sustainability of the new digital infrastructure? Questions abound on how and where the servers that will support the digital infrastructure be hosted. Also, many Nigerians are concerned about the capacity of the country to generate enough electricity to host data centres for this project.
In a country where not enough electricity is generated, hosting a national project such as the e-naira system seems an arduous task for the government. With the current inability to power street lights, traffic lights, police stations and so on, it feels inconvenient to think about a government-run project whose electricity demand is enormous.
Running data centres on generators is not quite the alternative, either. The considerable cost of fuelling and servicing or replacing generating plants for a project of this magnitude may be unbearable for a corruption-laden country whose financial statements are filled with unsustainable injections and irresponsible withdrawals.
Many others are sceptical about security issues surrounding the e-currency programme. However, the CBN has assured that the e-Naira system will be subjected to comprehensive security checks and that all data and personally identifiable information (PII) will neither be kept on nor stored on the ledger.
With all these issues raised, many Nigerians are in doubt about how well this new digital currency era will fare.
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