Through the apex monetary authority last October, the government of Nigeria made great news over the launch of Africa’s first central bank digital currency (CBDC), the eNaira.
Launching the new CBDC in Nigeria was set to expand citizens and other holders of the currency’s access to banking and enable more remittances inflow. It was also hoped that introducing the new payment system would help expand the country’s growth.
The eNaira, issued by the Central Bank of Nigeria (CBN), is set to provide a unique form of the traditional cash in circulation, however, in digital form. It is dominated and kept in parity with the fiat naira currency.
Also, the eNaira serves the same purpose as the popular legal tender in its exchange capacity and store of value function. The digital currency is expected to outperform the traditional paper currency in retail transactions and payments and its fluidity of ownership among various classes of individuals in the country.
This newly launched CBDC rides on blockchain technology, as does the cryptocurrency. It is held in a digital storage called the e-wallet. The CBDC helps facilitate traceable business and remittance transfers and can be used to finance local or foreign trades. The platform is designed to enhance a secure identifier with the holders of the currency, and that breathes an assurance of a safe structure accompanying the use and ownership of the CBDC.
Trade and digital cash transfer with the eNaira is carried out on a peer-to-peer basis, without a financial intermediary, and anyone can be a holder and user of the CBDC. The currency is also non-interest yielding, unlike the traditional savings deposit sitting at the banks with interest accruals over time.
At launch, the eNaira attracted the attention of 3 banks, 2,000 customers and 120 merchant banks who had a ready registration status with the e-currency’s platform. Also, about N200 million worth of eNaira was issued to commercial banks and other accredited financial institutions at launch.
Just over a month post-activation, the eNaira was reported to have aided the completion of 37,810 transactions, increasing the total amount of transactions to over N208.91 million, according to Nairametrics. As of November 29 2012, the total supply of eNaira in circulation was N62.46 million.
Today, the excitement and media buzz over the well-celebrated eNaira seem to have subsided. There appears to be no discussion about operations and transactions facilitated by the newly introduced digital currency. This was expected since questions surrounding the intention to introduce the eNaira hurriedly and the digital currency programme’s sustainability have generally been raised from the onset.
When the CBN openly launched the eNaira, only three local television channels were allowed to attend the event. Journalists did not have the opportunity to question officials to elicit more enlightening information about the newly launched digital currency programme. This was the first point of suspicion about the launch.
The CBN’s 9-page FAQs addressed several questions surrounding the technology, ownership and usability of the eNaira. However, issues surrounding the currency’s transferability were not addressed, which casts a thick cloud about the usage of the eNaira vis-à-vis the traditional paper currency.
People are still sceptical about the flexibility of use of the eNaira. Nigerians care about the ability to transfer some amount of the eNaira back to their traditional savings account and vice versa. Also, those who trade the cryptocurrency are keen on using the decentralised currency alongside the centrally controlled eNaira.
The government has announced that the eNaira will enhance direct government welfare payments to deserving recipients and increase the tax net. However, Nigerians wonder if this is a genuine reason to introduce the eNaira early since the government lacks accurate and up-to-date data for every individual.
This becomes more unbelievable when the unbanked and remote rural dwellers are considered. It is difficult to advocate for a CBDC allocative and distributive advantage over the traditional paper naira with a poor database and low literacy and financial inclusion levels.
Furthermore, the CBN’s unstable rules regarding foreign exchange access and the attendant weakening of the naira, which continually erodes savings, has questioned the monetary authority’s ability to maintain a hitch-free CBDC programme.
Read also: Ecobank, GTB lead eNaira adoption in Nigeria
People become risk-averse whenever the government takes over a thriving and well-embraced system like cryptocurrency. The fear that the government will import its inept and unreliable attitude into the financial management of the economy makes it difficult for Nigerians to fully subscribe to the new e-currency programme.
The baseline technology required to sustain the digital currency programme is also hardly readily available. Characterised by poor electricity supply, high cost of electricity tariff, poor internet infrastructure and high cost of data subscription, hosting a complex and highly digitalised network of e-ledgers for a very large supply base may not come in handy.
Also, considering the country’s poverty level, access to technology tools such as smartphones and data will undoubtedly deter a more significant proportion of the population from owning the eNaira currency.
Poor advertisement and education about the CBDC and a weak political will to push for increased adoption of the same have made the overall purpose of the eNaira launch a laughable effort. For these reasons, it becomes necessary to question the government’s undue rush towards the launch of the eNaira programme.
Perhaps, some plans are underway towards re-igniting the eNaira programme? We do not know at the moment. However, what remains sure is that the sudden silence over the CBDC in Nigeria further proves the point that the Nigerian government was not ready for the big game it started when the eNaira was launched last year October.
