I n October 2021, Nigeria was put on a global spotlight when the Federal Government of Nigeria through the Central Bank of Nigeria launched a home grown crypto currency also called e-Naira, thus becoming the first Central Bank in the world to do so. This innovative effort by the apex bank was praised when other countries like India, China, and South Africa etc. were also looking at introducing their own home-grown digital currencies.
Despite the applause, some have questioned the rationale for such introduction and the value to the economy, but others believe it will fill the void of inaction, giving the government psychological satisfaction. Before October 2020, crypto currency trading had become rife and pervasive. It became the first-choice investment channel for mostly young investors and some older people too. The U.S was the only country ahead of Nigeria in crypto currency trading, and there are reasons for the surge: Our young population; a bubbling tech ecosystem; an unstable currency and high remittances.
Government officials, finance experts and notable businessmen may have invested in crypto currencies there by making the industry to boom. This was the case until the #EndSARS protest in October 2020, when contributors went underground to keep funding flowing despite government efforts to stop the illicit flow of funds. The failure of the government to stop the flow of financial support for the protesters led to a 27% drop in diaspora remittances that year when crypto trading in Nigeria reached $309.6 million. Thus, the February 2021 ban was expected driving operators underground. While many seek alternatives, CBN assured Nigerians of the benefits of the e-Naira. This article is about the government assumption on the e-Naira and milestones reached by the Central Bank since the launch of the CBDC. First, I think it’s wrong to compare e-Naira to crypto currencies like Bitcoin for instance. Both are different and serve different purposes.
I’ve read many comments on why it’s different. I don’t mind the technical reasons that were put forward. I am concerned about why they are not the same, why people won’t embrace them as the same and what the government can do to get the people excited about the scheme as they were with Bitcoin and all the rest. Why do Nigerians prefer Ponzi schemes despite losing billions in such investments? Why was unregulated crypto a big draw in Nigeria? The reasons are simple but sad: We thrive in informal, unstructured environment. This is also why the Nigerian economy, despite all the shocks, has not suffered as much as other countries that suffered the same fate.
The Nigerian economy is unstructured and informal, so structure, regulation and order are largely unpopular with the people. But which responsible government will allow its monetary policy to be unregulated, unstructured and informal? Nigerians like to sow and harvest quickly. They hate farmers’ investment patience. If the e-Naira lacks these attributes, it is less likely to be popular with the people. This calls for more awareness and sensitization to change deep rooted habits and orientations. Despite the odds, the Central Bank is optimistic about the e-Naira. The CBN Governor, Mr. Godwin Emefiele, at the grand finale of the e-Naira Hackathon event said that the e-Naira is the same naira with more possibilities in response to the emerging trends and developments in the global digital space. As captured in the design paper, e-Naira is a journey, not a hundred meters race.
The journey is iterative and requires cutting-edge innovation to achieve policy goals. To achieve its mandate of preserving monetary and financial stability, the CBN charts the future of Nigeria’s legal tender, be it traditional or digital as the economy transitions to a digital one, as well as the course for innovation in the financial sector an in the infrastructure underpinning financial markets. Therefore, balance innovation and stability becomes imperative.
The launch of e-Naira was timely and strategic in complementing the Federal Government’s diversification and digitization initiatives, such as the Nigeria Digital Economy Policy and Strategy (NDEPS), the National Broadband Strategy, and the Start-Up Bill. The CBN believes e-Naira will benefit Nigeria and Nigerians. The e-Naira is expected to improve financial inclusion, reduce poverty, enable direct welfare disbursement to citizens, support a resilient payments ecosystem, improve central bank money availability and usability, facilitate diaspora remittances, reduce cash processing costs, and improve crossborder payment efficiency, among other things. The e-Naira was created to give Nigerians a cheap, safe, and trusted payment method. The e-Naira would give underserved and unbanked segments of the population access to financial services.
Innovative e-Naira products and services would boost Nigerians’ participation in the digital economy and boost the Fintech ecosystem. The e-Naira project adopted a phased-approach to achieve its goals, with the first phase focusing on banked users and the second on financial inclusion. The e-Naira also has an innovation layer for building products and services to increase Nigerians’ participation in the digital economy and promote the growth of a Fintech ecosystem. So far, the e-Naira has reached 840,000 downloads, with 270,000 active wallets, including 252,000 consumer wallets and 17,000 merchant wallets. Transactions on the platform have reached over 200,000 and N4.0 billion. The second phase of the project aims to drive financial inclusion by boarding unbanked and underserved users offline.
Phase two is expected to deliver more gains with an estimated 8,000,000 active users using the diffusion of innovation model. “Enabling Private Sector Innovation” is one of the three foundational principles of Central bank Digital Currency (CBDC), so the hackathon held on August 18 2022 was neither a coincidence nor an accident, but rather another forward leap by the Central Bank of Nigeria in the implementation of e-Naira, to ensure all Nigerians receive the full benefits of a CBDC (CBDC). The Hackathon creates a collaborative environment for experts with diverse skills to drive sustained innovation to make e-Naira the pinnacle of digital financial services and the gateway to the Digital Economy. It aims to promote financial inclusion, SME growth, and start-ups, facilitate crossborder trades, transfers, remittances, and FX exchanges, and improve interbank market efficiency.
Today’s event aims to engage key financial technology stakeholders to strengthen e-Naira’s relationship with Fintechs. The Central Bank’s e-Naira hackathon attracted 4,667 young, innovative Nigerians (4,082 men and 582 women). This shows that Nigerians inside and outside the country have innovative ideas and are eager to use the e- Naira to improve digital financial services and boost national development. There is no doubt that e-Naira is a great idea with loads of possible options but more work needs to be done by the apex bank to further explain the scheme and its benefits to the people.
The incentives need to be clearly spelt out so that people will understand the benefits of e-Naira as against physical cash in their daily transactions. A little incentive may all be what is required to energize the project and grow it to sustainability.