Digital currency: despite start-up problems, CBN leads the way with eNaira

When the Central Bank of Nigeria (CBN) officially launched its digital currency known as e-naira on October 25, 2021, the financial sphere became suspicious of its success due to the cryptocurrency’s hole punch in the country.

Being the second Central Bank Digital Currency (CBDC) fully open to the public after the Bahamian Sand Dollar, the digital currency is gaining momentum with its download projected to be 10,000 in Q2 2022 from 7,300 recorded in Q1 of the year.

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Consumer wallet downloads have so far been the most downloaded on the merchant wallet, but person-to-bank and bank-to-person transactions have made up around 90% on the platform.

But experts see this setback as the result of a lack of business awareness as well as restrictions around bank verification numbers, BVN and other Know Your Customer, KYC requirements.

CBN Governor Godwin Emefiele had said in January that the launch of eNaira was aimed at banked Nigerians and that BVN was mandatory to prevent fraudsters from hacking into the system.

Emefiele said, “We feel that you have to have a BVN and you have to have an account to be able to access it and we also find that has created kind of a constraint for people regarding integration with BVN and others. But again, we believe that what we do by using the BVN is the best to prevent fraudsters from hacking the system.

“Most of the complaints received were primarily about the inability of potential users to onboard and activate the e-wallet due to inadequate BVN registration records.”

Emefiele further stated, “Since its launch about three months ago, Nigerians have continued to gradually adopt eNaira as a fast and reliable medium of exchange.”

This is evident with its downloading from North America to Australia and all of Africa, demonstrating the attraction of not only Nigeria but other parts of the world with over 700,000 downloads.

According to the International Monetary Fund (IMF), the launch of e-Naira by the Central Bank of Nigeria is attracting substantial interest from the outside world, including central banks.

He said that around 100 countries are exploring CBDCs at one level or another, some research, some testing and a few are already distributing CBDCs to the public, after the launch by CBN.

For example, the IMF said Sweden’s Riksbank has developed a proof of concept and is exploring technology and policy implications while in China, the digital renminbi is gaining acceptance with over one hundred million individual users and billions of yuan. of transactions.

In 2021, Article IV of the IMF Executive Board found that full acceptance of eNaira could deepen and foster financial inclusion and improve the delivery of social assistance, but that close monitoring of risks associates should be highlighted.

On the benefits of CBDCs, PwC France and Maghreb Financial Services Risk and Blockchain Partner, Benoit Sureau noted that its wholesale would streamline post-trade operations of security tokens through atomic delivery versus payment and increase market efficiency. for several asset classes.

“We expect the research, testing and implementation of CBDCs to intensify in 2022. The success of eNaira in Nigeria is likely to spur the development of CBDCs in countries where financial inclusion is l one of the main desired results.”

Similarly, Andrew Nevin, West Africa Financial Services Leader and Chief Economist, PwC Nigeria, said, “CBDCs will transform the payment system as low value transactions will become possible free and secure. for everyone”.

“Success could also catalyze more complex and transformative CBDC uses, including blockchain identity management, land registry, and supply chain verification. As each of the use cases grows, we can draw more people into the economic and financial system and lift tens of millions of people out of poverty.

Additionally, global financial services leader PwC USA John Garvey said it is especially important for financial institutions to understand where central banks are at with digital currencies, as CBDCs will eventually circulate in payment system and will begin to reach bank balance sheets.

“Extensive consultation with central banks is key to clarifying the business case for CBDCs, from an inclusiveness, financial performance and interoperability perspective. One thing is clear, reducing the cost of payments in an economy brings value to the whole economy and to citizens. If CBDCs can ultimately enable more efficient payments, it will benefit everyone,” Garvey said.

Analysts believe that with the CBDN, the history of money is entering a new chapter with broader technological and social changes.

CBN Governor Emefiele speaks on eNaira

Emefiele had said that eNaira would support a resilient payment ecosystem, encourage rapid financial inclusion, reduce the cost of processing cash, enable direct and transparent social intervention for citizens, and increase revenue and tax collection.

He said eNaira would also facilitate remittances from the diaspora, reduce the cost of financial transactions and improve the efficiency of payments.

“Therefore, eNaira is the CBDC of Nigeria and it is the digital equivalent of physical naira. As the slogan simply sums it up, eNaira is the same naira with many more possibilities.

“eNaira – like physical naira – is legal tender in Nigeria and a liability of the CBN. Both eNaira and naira will have the same value and will always be exchanged at one naira for one eNaira.

Emefiele said that in an effort to further de-risk the process, CBN paid close attention to the overall payment and financial architecture and designed eNaira to complement and enhance these ecosystems. He said the bank also had safeguards and policies in place to maintain the integrity of the financial system.

He said that since the eNaira platform went live, there has been tremendous interest and an encouraging response from Nigerians and others across the world, with over 2.5 million visits. daily on the website.

More Benefits of e-Naira

Key benefits of e-Naira include growth: e-Naira promotes economic growth by providing easier access to capital and financial services, thereby increasing economic activities at low or zero transaction rate.

Delivery: eNaira offers a secure and cheaper remittance option for the diaspora and an increase in the speed of these transactions.

Surveillance: eNaira’s traceability limits its use for illicit or fraudulent purposes. Welfare: eNaira enables the efficient, equitable and faster distribution of cash assistance to households and communities included in the government social welfare program.

Inclusion: eNaira provides financial inclusion by making financial services available to people or communities who do not have (enough) banking opportunities.

Exchange: eNaira increases local and international trade by making transactions cheap, safe, fast and better.

Security: eNaira has strong security as it cannot be tampered with or counterfeited due to its unique identity and security structure. Revenue: eNaira makes revenue collection easier by reducing cash processing costs.

Moreso, CBN’s Director of Corporate Communications, Mr. Osita Nwanisobi, also reiterated, “e-Naira is expected to deepen financial inclusion by bringing more people into the financial space, supporting a resilient payment ecosystem, reduce the cost of cash processing, enable transparency and social intervention for citizens, increase transparency of revenue and tax collections, facilitate remittances from the diaspora, reduce the cost of financial transactions and improve the efficiency of payments.

Noting that there have been encouraging responses to e-Naira, Osita added, “Customers who download the eNaira Speed ​​Wallet app will be able to onboard and create their wallet; fund their eNaira wallet from their bank account; transfer eNaira from their wallet to another wallet and make payment for purchases at registered merchants.

“I therefore call on Nigerians to embrace eNaira just like our physical Naira – our pride,” he said.

Sylvia B. Polson