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In order to enhance Nigeria’s payment system, boost transactions and reposition the economy, President Muhammadu Buhari, last week, launched the Central Bank of Nigeria Digital Currency (CBDC), also known as eNaira. It is the electronic version of the national currency, which, by the unveiling, makes Nigeria the first African country to introduce a Central Bank Digital Currency.
The payment system was developed by Fintech, a company which has reportedly created digital currency in some Eastern countries, as well as in China and Cambodia. A recent survey of Central Banks across the world by the Bank for International Settlements (BIS) showed that almost 90 per cent are actively researching the potential for CBDCs, 60 per cent were experimenting with the technology and 14 per cent were deploying pilot projects.
At the launch in Abuja, President Buhari and the CBN Governor, Godwin Emefiele, highlighted the benefits of the eNaira and why it has become imperative at this point in time. According to the President, the digital currency will make the country’s Gross Domestic Product (GDP) rise by $29 billion in the next 10 years, increase Diaspora remittances, foster cross border trade, improve financial inclusion, make monetary policy more effective, and enable the government send direct payments to citizens eligible for specific welfare programmes.
President Buhari also expressed optimism that eNaira would help tackle illicit flow of funds and further strengthen government’s anti-graft drive, increase accountability and transparency in operations of government. Speaking in the same vein, Emefiele said the CBN was acutely aware of the expectations, the envisaged risks involved at the take off stage, and how to mitigate them as the payment system provides high-value and time-critical payment services to financial institutions and individuals. He gave assurance that in no distance time, and with effective monitoring and supervision, the initiative could be the best and most sustainable way to strengthen the value of the naira that has been on a free fall lately, insisting that what the country requires at this time is more domestic production for export. We agree particularly with the last point.
The CBN also says that “33 banks have been fully integrated and live on the platform” with N500 million already successfully minted by the bank, N200 million issued to financial institutions, and over 2,000 customers onboarded, plus 120 merchants successfully registered on the eNaira platform. To further deepen the eNaira project, a new financial instrument called, “The 100 for 100 Policy on Production and Productivity (PPP),” to be domiciled in the Development Finance Department of the CBN under the direct supervision of the CBN Governor, has been created. Under this policy, the CBN says it will screen, scrutinise and financially support 100 targeted private sector companies in 100 days. The policy took effect on November 1, 2021.
We commend the CBN for the various monetary policy efforts it has enunciated so far. The eNaira initiative has further strengthened its reputation as a leading financial innovator in transactions payment. There is no doubt that the new payment system could be a watershed in the country’s quest to becoming Africa’s powerhouse in financial transactions. It also has the potential to increase growth prospect as well as provide succour to deposit bank customers who have been saddled with excessive charges in recent times.
However, there are fears that the eNaira accounts will be open to frauds. This is despite the apex bank’s attempt to dispel such fears by insisting that the project is “secure and dependable.” It is also good that the CBN has given assurance to minimise inherent risks of disintermediation of any negative impact on the financial system. At the same time, there is need for more sensitisation and awareness campaigns on the eNaira by the CBN and other relevant government agencies in the media to generate trust and confidence in the new payment system.
This has become necessary in view of the fact that many Nigerians are still ignorant of what the eNaira is all about as well as how to use it for payment transactions. Besides, the international investors who normally prefer a currency that is acceptable globally and convertible, such as the dollar, pound and euro should be enlightened more on the prospect of using the eNaira for their transactions.
Therefore, the CBN needs to properly educate the masses on how to use the eNaira in such a way that will not compromise the safety of their funds. In all, the CBN should ensure that the implementation of the digital currency is seamless.
