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From Uche Usim, Abuja
As the world gradually morphs from analogue to digitised economy, conversations around simplifying and cementing electronic payment platforms have been the preoccupation of central banks across all jurisdictions.
Economic experts and tech enthusiasts have repeatedly urged Nigerian leaders to tap into the energy, enthusiasm and creativity of the youths, who constitute a larger portion of the over 200 million population, to drive the digital economy project.
It was against this backdrop that the Central Bank of Nigeria (CBN), in technical partnership with Bitt Inc, launched the eNaira on October 25, 2021, becoming the first nation in Africa and the sixth in the world to launch an electronic currency.
According to the CBN Governor, Mr. Godwin Emefiele, the launch of eNaira was timely and strategic in complementing the 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 other initiatives.
The Central Bank Digital Currency (CBDC) aims to support the digital economy, improve economic activities, simplify and facilitate cross border payments and trade; ensure the inclusion of excluded people in the financial system; improve the effectiveness of monetary policies; ease tax remittance and collection to support economic growth and ease in administering strategic social interventions to support Nigerians.
However, to deepen the eNaira usage and ensure its success, the CBN recently held the grand finale for the 2022 eNaira Hackathon in Abuja, where Emefiele further disclosed that both the banked and unbanked Nigerians will soon be able to open an eNaira wallet and conduct transactions by simply dialling *997 from their phones.
“Shortly after this, both merchants and consumers with bank accounts can use the Nigerian Inter-Bank Settlement Scheme’s (NIBSS) Instant Payment (NIP) to transfer and receive eNaira to any bank account. This will further deepen the integration of the eNaira with the existing national payment infrastructure”, he said.
The event recorded a sizeable interest from young and innovative Nigerians with 4,667 registrations, comprising 4,082 male and 582 female applicants. Twenty participants reached the finale stage and 10 winners eventually emerged. The winners will be financially rewarded in eNaira and will also enjoy other incentives provided by partners in the project.
This growing interest in the eNaira project further corroborated the fact that Nigerians, both within and outside the country, possess innovative ideas and are willing and ready to leverage on exciting opportunities that the eNaira presents for enhancing digital financial services and contributing to national development.
The CBN governor expressed confidence that the eNaira hackathon will unveil a pool of talents that would fuel the transformation of Nigeria into a world-class digital economy and beyond.
“From an initial cohort of over 105 groups that made the quarter finals and 75 teams that progressed to the semi-finals, the hackathon has reached its climax today with 20 teams in the finals from which the top 10 teams would emerge as Prize winners.
“Enabling private sector innovation remains one of the three foundational principles of Central bank Digital Currency (CBDC).
“The hackathon is an initiative that creates a collaborative environment for experts with a diverse set of skills to drive sustained innovation geared towards making the eNaira the pinnacle for digital financial services and the gateway to the digital economy.
“It is intended to seek solutions that would: drive financial inclusion, SME growth and the creation of start-ups; facilitate cross border trades and transfers as well as international remittances and FX exchanges; effective implementation of welfare-inclined government programmes; and enhance efficiency in the interbank market. “The eNaira Hackathon is targeted at providing an engagement with critical stakeholders in the financial technology space to deepen the link between eNaira and Fintechs”, he noted
Emefiele revealed that since the launch of the eNaira, downloads have reached 840,000 with about 270,000 active wallets; comprising over 252,000 consumer wallets and 17,000 merchant wallets.
According to the CBN governor, the second phase of the project has begun and it is intended to drive financial inclusion by boarding unbanked and underserved users leveraging offline channels.
The second phase is also expected to deliver more gains with a target of about 8,000,000 active users based on estimations using the diffusion of innovation model.
He added that the eNaira remains a journey as seeks to help the economy transit to a digital ecosystem and charting the course for innovation in the financial sector.
Also speaking at the hackathon grand finale, the Deputy Governor, Economic Policy of the CBN, Dr Kingsley Obiora hailed the eNaira initiative as it has grown the value of electronic transactions from N393 billion in 2014 to N2.4 trillion today.
“In South Korea, 77 per cent no longer use cash to do payment, while in the Philippines, it is 30 per cent. In Nigeria too, we are also seeing the same decline in the use of cash, the minting of currencies in the CBN has been reducing in the last couple of years.
“So, if you look at this movement, you will realize that the Central Banks in the world are responding to the yearnings of citizens, which is why citizens in 96 per cent of Central Banks in the world are either working on digital currencies or they have done so already”, he added.
In his remarks, Daniel Awe, the Group Head, African FinTech Foundry, a technical partner to CBN hailed the apex bank for transforming from a traditional regulator to a smart, innovative one.
“The Hackathon is a platform that brings entrepreneurs, coders, product managers to solve problems and build new business models.
“All over the world, there has been disagreement between innovators and regulators because regulators usually look at impact on financial stability as well as impact of those innovators on consumers as well as the risk while the innovators look at the opportunity in their ideas.
“However, this CBN is different as it has over the years partnered with innovators that will create job employment and bring value.
“At African Fintech Foundry, we are honoured to have worked with CBN, from over 5,000 applications which is the highest application ever on the continent. Subsequently it has been trimmed down to 20z which was a difficult task.
“For those who could not make it, never quit and for those who will emerge winners, it is a morale booster to do more”, he admonished.
The PricewaterhouseCoopers (PwC) in its 2022 CBDC Global Index and Stablecoin Overview, gave the eNaira a retail index value of 95 while the country also ranked number one in Africa. The index is based on a Banking for International Settlements (BIS) working paper, the World Bank, and PwC analysis.
On eNaira’s effect on inflation, analysts assure that it would check roundup inflation.
For instance, coins in Nigeria are scarce; thus, most merchants round up their prices to match with available currency, usually notes. This rounding up induces an artificial rise in prices because any cost-push does not cause the price hike but other factors, for example, selling eggs for N100 instead of N88. With the e-Naira, it becomes possible to transfer the exact cash price in the marketplace, especially in rural areas. This reduces the possibility of “round-up inflation.”
Again, the eNaira has a low-cost advantage when compared to FIAT (normal currency). The daily transfers between accounts are at no cost to the account holder. Lower transaction cost is a massive incentive as traders will pay no fees for withdrawals and deposits to and from their bank account. No transaction fees reduce the cost of commerce while improving safety.
The CBN has stated that while efforts will be made to put signages and decals at designated merchant locations, customers can simply ask the merchants if they accept eNaira.
However, to guarantee sustainable success of the new initiative, economic analysts have called for massive enlightenment, especially among the unbanked and the illiterates; since the eNaira has the capability of bringing Nigerians who have no bank account but have a phone into the formal financial economy.
