Nigeria: CBN, Emefiele and Enaira
The eNaira is trustworthy and complies with Nigeria’s financial laws.
Central Bank of Nigeria Governor Godwin Emefiele will go down in history as one of Nigeria’s most innovative CBN governors. Emefiele has launched several initiatives to deepen the country’s monetary sector, the latest being eNaira. It is simply a local digital currency equivalent to the paper naira.
However, eNaira offers more options, is cheaper for the owner because it is immune to several bank charges and it is a boost to the cashless policy. The launch of eNaira on Monday, October 25, is going down in history. For the record, this makes Nigeria the first African country to adopt the electronic wallet transaction system. It places Nigeria on the same pedestal of banking innovation as China and emerging markets like the Bahamas and the Eastern Caribbean.
On launch day, it already had 33 integrated banks, recording a daily hit of over 2.5 million website visits. With 200 million naira already issued to financial institutions and over 2,000 integrated customers and over 120 traders successfully registered on the platform at the launch, it is safe to say that CBN was well prepared for the experience. digital.
A heartwarming fact is the question of control. With eNaira, things can’t go wrong as it gives CBN the leeway to exert some control over the market to deter abuse, fraud and various contingencies that typically plague the fintech space. CBN has deliberately built collateral around eNaira, making it a more secure medium of financial transaction than cryptocurrency.
Many Nigerians wonder what eNaira is. Some wondered how it would benefit them. And for still others, it’s just another elite fad to feed the fat economy.
Simply put, eNaira is the central bank’s digital currency (CBDC) and it is the digital equivalent of the physical naira. It is the same naira but offers a lot more possibilities and flexibility. And just like the physical naira – it is legal tender in Nigeria as well as a responsibility of the CBN. It will always exchange a naira for an eNaira.
Its introduction was no accident. He has a story. Recall that on February 5 of this year, the CBN published a circular addressed to banks and other financial institutions. The circular carried a strong but inevitable message: It was a reminder that cryptocurrency transactions and the facilitation of payments for cryptocurrency exchanges had been banned. The CBN further ordered all banks and other financial institutions to close the account of any person or entity that trades in cryptocurrency or operates cryptocurrency exchanges.
Many Nigerians spat at CBN for dimming the light on a new frontier in fintech where young Nigerians and others were already finding their bearings and reaping all the benefits. CBN has promised to introduce a local digital currency that Nigerians can trust, control and own. But CBN had good reason to ban cryptocurrency. It is borderless, unchecked and subject to manipulation. But there was a bigger reason for the ban: Terrorists and their financiers took refuge with cryptocurrencies to move money across borders and buy guns and other weapons of destruction. massive to support their bloody war. Nigeria has been at the center of terrorist attacks and anything done within the law to restrict the powers of terrorists is welcome. This is what won the sympathy of the CBN public when it banned cryptocurrencies.
The recent conviction of some Nigerians in the United Arab Emirates (UAE) for being terrorist financiers clearly justifies CBN’s action on cryptocurrencies. ENaira is the fulfillment of the CBN’s promise to deliver a digital currency that can be regulated, trustworthy, and compliant with Nigeria’s financial laws.
The advantages of eNaira are manifold. It will deepen the country’s digital economy ecosystem. In recent years, Nigeria has crossed new frontiers in the digital economy space. Whether in agriculture, healthcare, e-commerce, banking, and education, significant progress has been made by President Buhari’s government to bring Nigeria into the matrix of the global digital economy.
In 2020, in the midst of the covid-19 pandemic, Nigeria joined forces with six other countries to form the Digital Cooperation Organization (DCO). The founding member countries of DCO are Bahrain, Jordan, Kuwait, Nigeria, Oman, Pakistan and Saudi Arabia. The aim is to âstimulate increased collaboration and cooperation between entrepreneurship, innovation, business growth and employment in a shared digital economyâ.
Values ââshared among DCO countries include collaborative digital transformation that would enable Member States to empower women, youth and entrepreneurs within their jurisdictions.
The goal of the DCO is essentially to accelerate growth across the digital economy and achieve greater prosperity by promoting common interests and collaborative digital transformation. CBN’s introduction of eNaira is on the DCO menu as it would increase Nigeria’s growing stature in the global digital economy market.
During the launch of the CBDC, President Buhari said it has the capacity to increase Nigeria’s gross domestic product (GDP) by $ 29 billion over the next 10 years. The President acknowledged that digital currency has specific advantages in Nigeria that affect different sectors of the economy. He is right. Nigeria, thanks to the cashless policy of the CBN, has seen a real growth of electronic transactions in different sectors. The growth of the information and communications technology (ICT) sector characterized by the widespread use of mobile phones, the increasing penetration of broadband, the upsurge in the deployment of computers (especially laptops) in households and offices also boosted electronic transactions.
The use of cash for doing business and making payments is declining. It fell further from 2020 at the start of the Covid-19 pandemic, thus giving birth to a new era of robust digital economy.
Cryptocurrency, despite the buzz and hype, has remained largely an artificial private currency that has built a huge cloud of doubt around itself. The very fact that not all nations of the world have embraced cryptocurrency speaks volumes about the mistrust that still surrounds its functioning.
This explains the growing number of central banks around the world that are starting to consider issuing digital currencies to quench the thirst for such currencies among their citizens. Unlike cryptocurrency which lends itself to handling all kinds of unethical transactions due to little or no regulation, reserve bank digital currencies are faster, more secure means of payment, easier and cheaper. The issuer is known and the regulations are certain. And with more countries rolling out their respective versions of digital currencies, cross-border commerce and financial inclusion would be enhanced.
Thanks to Emefiele with the support of President Buhari, Nigeria got here early. It’s a great place to be. It is predicted that over the next decade, national digital currencies will become the dominant player in the ecosphere of electronic transactions. Its flawless efficiency and ability to improve monetary policy operations across borders will make it the frontrunner for years to come. The reluctance that welcomed cryptocurrency to the world will not affect national digital currencies. While cryptocurrency tends to compete with respective local currencies, CBDCs only complement local currencies. In Nigeria, the eNaira complements the physical naira.
CBDCs have the capacity to foster economic growth through better economic activities, increase remittances and improve financial inclusion. Nigeria is a large recipient of remittances, commanding one of the largest numbers of diasporas in the world. The eNaira will play a larger role in managing diaspora remittances.
The beauty of the eNaira is that it’s not hidden from CBN’s radar. Therefore, while helping to integrate more people and businesses from the informal sector into the formal sector, it will ultimately increase the country’s tax base.
Olali, political analyst, wrote from Yenagoa