Revisiting Nigeria’s Digital Currency | THIS DAY LIVE

Dike Onwuamaeze highlights the bbenefits of eNaira

The recently released 2022 PwC Central Bank Digital Currency (CBDC) places Central Bank of Nigeria (CBN) eNaira as a leader among retail CBDC projects in Africa.

It also showed that the CBN is far ahead of many of its peers in terms of digital currency, as a large majority of central banks around the world are currently planning to launch their own digital currencies.

The annual CBDCs and Stablecoins Professional Services Index, which was released recently, stated, “CBDCs will facilitate more efficient, lower-cost, 24/7/365 cross-border payments for the financial services industry.

“We expect CBDCs to greatly benefit cross-border transactions and the economies of all jurisdictions involved.

“Overall, retail CBDC projects, which are digital currencies designed for public use, have reached higher levels of maturity than wholesale projects, which are digital currencies used by financial institutions that have accounts with central banks,” the report noted.

He did, however, note that there had been an increase in the number of big pilots in recent years.

China has become the first major economy to pilot a retail CBDC in 2020 with the digital yuan. The pilot was operating in 12 cities as of March 2022.

The Sand Dollar, issued by the Central Bank of the Bahamas as legal tender in October 2020, was the first such retail project. Nigeria’s central bank launched Africa’s first CBDC, eNaira, shortly thereafter.

On the wholesale side, PwC ranked the combined effort of the Hong Kong Monetary Authority and the Bank of Thailand to launch mBridge as the best product.

Central banks are working on developing a proof-of-concept prototype to enable real-time cross-border currency payments on distributed ledger technology.

Other major projects include efforts by Canada, Singapore, France and South Africa.

“Wholesale CBDCs have the potential to streamline security token post-trade operations through atomic delivery versus payment and increase market efficiency for multiple asset classes,” said Benoit Sureau, partner at PwC France and Maghreb Financial Services Risk and Blockchain.

“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.”

West Africa Financial Services Leader and Chief Economist, PwC Nigeria, Andrew Nevin said, “CBDCs will transform the payment system as low value transactions will become possible free and securely for everyone. the world. 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 particularly important for financial institutions to understand where central banks are at with digital currencies because ultimately CBDCs will start flowing through the payment system and hitting 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.

According to a separate PwC report, throughout history money has evolved. Beginning with the use of everyday objects, to precious metals, to the gold standard, and finally, to fiat in 1971, money has changed in line with broader technological and social changes.

He noted that the development of computer technology in the second half of the 20th century enabled the digital representation of currency.

According to the report, in 1990 in the United States, all money transferred between its central bank and commercial banks was in electronic form.

He noted that in the 2000s, most money existed as digital currency in banking databases.

While digital currency has been around for a few decades, many argue that we are now on the eve of digital currency 2.0.

Not the account-based e-money that has been around for decades, but a new type of token-based digital currency. Tokenization, often via blockchain, is the basis of cryptocurrencies, stablecoins, and many central bank-offered digital currencies.

He said the new wave of token currency began with the introduction of Bitcoin in 2008 as the first widely used, decentralized, peer-to-peer cryptocurrency based on distributed ledger technology called blockchain.

Furthermore, he said another inflection point came with the announcement of Libra (now renamed Diem) in 2019, by Facebook. Conceived as a private stablecoin – a privately issued cryptocurrency tied to a stable asset (e.g. fiat currency, physical gold, etc.) – Libra/Diem has led to the development of a number other stablecoins.

“It is in this context that central banks around the world have increased their interest in CBDCs. Designed as a digital representation of fiat currency, CBDCs are a central bank liability just like physical currency.

Benefits of eNaira

To CBN Governor, Mr. Godwin Emefiele, the central bank has decided to set up its own CBDC and name the digital currency eNaira, in hopes that the innovation will make a significant positive difference for Nigeria and Nigerians .

Indeed, eNaira continued to attract interest from the Nigerian banking public at home and around the world, with total downloads reaching 694,000 95 days (January 31st2022), after its unveiling.

A breakdown of the numbers showed that as of the date shown above, the total number of downloads through the iPhone operating system (iOS) was 136,000, while Android’s was 558,000. In terms of consumer wallets, the data showed that at 33%, Guaranty Trust Bank was ahead of the rest, just as Ecobank was currently leading in terms of merchant wallet downloads at 22%.

“Downloads continued to increase to nearly 700,000. ENaira wallets were downloaded from North America to Australia and across Africa,” the analysis had said.

Moreover, it showed that the app is also downloaded in South America, Europe, Asia and almost all countries in Africa.

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.

Emefiele added, “Therefore, the eNaira is the CBDC of Nigeria and it is the digital equivalent of the physical naira. As the tagline 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.

The CBN boss added that there would be strict adherence to Anti-Money Laundering and Anti-Terrorist Financing (AML/CFT) standards to preserve the integrity and stability of the Nigerian payment 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.

He said, “Today, customers who download the eNaira Speed ​​Wallet app will be able to do the following: 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 from registered merchants.

“There is no reason, absolutely no reason for anyone to be afraid of the risk of even hacking your account and such.”

“This morning I created my account and my account is working great. I talked about BVN; BVN is one of the best payment systems infrastructure we have in place and I can assure you that with everything done, you can’t hack it.

“If someone hacks into yours, it will be because you were careless in handling your information, not that the system failed,” he added.

He described eNaira as an extension of the payment system in Nigeria, which would improve payments outside the country.

Sylvia B. Polson