E-Naira: X-raying Nigeria’s First Digital Currency by Mujidah Yahaya
As Nigeria celebrates another year of being independent and as with every celebration, new changes are expected and such an example of a change, which was revealed to Nigerians is the Central Bank Digital Currency (CBDC), Nigeria’s first digital currency.
This Digital currency popularly known as E-Naira was firstly announced by the CBN following a ban on cryptocurrency earlier in the year by the Nigerian government.
E-Naira was created due to the rise in digital payment within the country which coincidentally results in a lower use of cash leading to the need to print fewer cash notes.
Speaking during a seminar organised for the Committee of e-Business in industry Heads Nigeria (CeBIH) ahead of E-Naira launch, Rukiya Mohammed, Director, Information Technology of CBN said the need for Nigeria’s digital currency arose from the fact that digital payment is rising while cash payment was declining both in Nigeria and globally.
She further added that 85 percent of Central Banks worldwide were considering digital currency and so CBN was also innovative to cope with the global trends.
“CBDC would be legal tender with one e-Naira equivalent to one Naira which shows fundamental differences between CBDC and cryptocurrencies,” she said.
This last statement showcases that there is a clear difference between CBDCs and cryptocurrencies, as the E-Naira provides a platform for the CBN to leverage blockchain technology to maintain a centralised and institutional role over the currency. This provides a clear distinction from Bitcoin, the world’s largest digital currency, and other cryptos which cannot be traced by a country’s central bank, making them difficult to regulate.
Most analysts have argued that in recent years trading of Bitcoin and other virtual currencies had become “widespread, disrupting economic and financial order, giving rise to money laundering, illegal fund-raising, fraud, pyramid schemes and other illegal and criminal activities.”
It is safe to say that the world at large is progressing rapidly in terms of technology and thus this digital currency should not come as a surprise to many. Worldwide, many businesses and organisations would very much prefer for their customers not to use cash in making payment, although cash payment is not yet extinct, but it is lower statistically in comparison to electronic and digital payments. Before we go further, we need to understand what this digital currency, namely “ eNaira” is.
The eNaira is a digital currency which like all other digital currencies is any type of payment which will purely be of electronic format and all payment shall be accounted and transferred using computers and electronic wallets which in contrast to cash payments which require the need to have physical bank notes available at the ready to carry out transactions.
Some characteristics of this digital currency are, the currency is solely digital and does not have any physical equivalent, the currency can be either centralized or decentralized such as cryptocurrencies being decentralized, and fiat currency being centralized. Digital currencies can also transfer value.
This “eNaira” is extremely advantageous in many aspects such allowing users to carry out transactions easier, across borders and faster over counters without having to wait for receiving the balance unlike with cash payments, the digital currency also cannot be soiled and do not require physical manufacturing, they can also serve as an easier implementation of monetary and fiscal policies by the Central Bank. But as with all things that are of advantage there are disadvantages.
Nigeria as a country is largely still classed as a developing country and this is majorly due to the entire state of living of the citizens. There is a major faction of the population which are below the poverty line and unable to afford the necessities of life, this shows that the majority of the population is not financially inclusive and thus are mostly still used to the traditional method of using cash to make payments as the majority do not have access to a bank account.
As the eNaira is being launched due to the increase of electronic payments, what is to happen to the section of people who are unable to access a basic bank account, or who do not even have a simple understanding of how technology works. Is the eNaira expected to be used only by those who are privileged to access the technology to hold this e-wallet or does the Central Bank have plans of ensuring everyone is financially included.
Though I strongly believe that CBN’s CBDC will be a game changer that would provide an alternative payment system and would radically transform the payment landscape, It necessary for banks within the country to up their game of being more technological as customers these days would rather have comfort from the tips of their fingertips which new FINTECH banks coming up are offering these solutions, until these banks are able to be technologically innovative, to meet their customers’ demands and fully support this new digital currency eNaira, as well as the country ensuring all citizens are financially inclusive, we beg the question.
ARE WE TRULY READY FOR A DIGITAL CURRENCY?
Mujidah Adedamola Yahaya is a Financial Technology MSC student at the University of the West of England – UWE Bristol. She can be reached on: [email protected]