Possible Impacts of e-Naira

 

An Editorial by the Nigerian Academic Excellence Magazine

On Monday, October 25, 2021, President Muhammadu Buhari launched the eNaira at the State House in Abuja, Nigeria’s capital city, after a previous plan to unveil the digital currency on October 1 was put on hold.

“We have become the first country in Africa and one of the first in the world to introduce a digital currency to our citizens,” President Buhari said at the official launch.

eNaira is the digital form of cash and is a direct liability on the Central Bank of Nigeria while the customer deposits are direct liabilities on the financial institutions.

eNaira wallet, on the other hand, is a digital storage that holds the eNaira. It is held and managed on a distributed ledger. The eNaira wallet is required to access, hold and use eNaira.

Nigeria is one of the five countries in the world to develop an official digital currency and the country's CBDC pilot is now the second largest behind China’s digital yuan, and aims to digitise payments and increase financial inclusion in Africa's most populous country.

President Buhairi said during the official launch that digital currency and the blockchain technology it uses can foster economic growth and increase the GDP of Africa's biggest economy by $29 billion over the next 10 years.

Nigeria’s Central Bank (CBN) Governor Godwin Emefiele added that around 500 million eNaira (1.21 million) have already been minted in lieu of the digital currency going live.

In a press release,  the CBN said the eNaira’s launch “marks a major step forward in the evolution of money and the CBN is committed to ensuring that the eNaira, like the physical Naira, is accessible to everyone.”

CBDCs are rapidly gaining popularity worldwide, and Nigeria is the first African country to officially launch a digital currency pilot.

Development of the eNaira was carried out by fintech company Bitt, whose Digital Currency Management System is also behind the East Caribbean Central Bank’s digital currency DCash.

Among the CBN’s goals is to digitise payments and increase financial inclusion, and a CBDC can offer citizens greater access to financial services for the underbanked or unbanked.

The Nigerian Academic Excellence, believes that because Nigeria is still considered as one of the most ‘unbanked’ countries in the world, decentralized identity systems and CBDCs will provide the population with a way to prove their identity and get access to banking services directly from their smartphone.

Using the blockchain ledger, the eNaira will be able to eliminate the need for third parties and contribute to efficient and low-cost transactions, as consumers gain access to low-risk and reliable payment options.

Additionally, enhanced oversight of funds and payments provides a level of transparency that can serve to strengthen public confidence and allow financial authorities to tackle economic crime and fraud.

However, critics of CBDCs fear they will allow central banks to accrue greater control, serving as a tool for regulators to monitor private citizens’ financial footprint.

The Nigerian banking sector is also likely to face a new challenge when dealing with digital assets. 

As genuine as the demerits might appear, the advantages of e-Naira, which include, fast, cheap, reliable and available payment channel, support for digital economy, improved economic activities, simplified and easy cross border payments, trade inclusion of excluded people in the financial system, improved effectiveness of monetary policies, ease in targeted social interventions to support Nigerians, ease in tax remittance and collection to support the Country’s growth are numerous enough to sustain it.

We therefore urge the Central Bank authorities to ensure that it stands the test of time.