With the recent introduction of the (CBN) Central Bank of Nigeria Digital Currency (CBDC), also known as the “eNaira,” by President Muhammadu Buhari, Nigerian citizens, including the economists, bankers, and members of the general financial public, have expressed considerable interest in the new currency. There have been a variety of reactions to the CBN’s decision, which is particularly noteworthy given that the same CBN outlawed banks & investment firms from transacting in or operating in digital currencies in February 2021, claiming that they posed an impact on the financial system in that time period.
Despite the fact that cryptocurrencies aren’t really national currencies and are thus not related to fiat money, the dangers associated with their usage are not entirely absent in the case of digital coins. The question has been raised as to what occurred between February & October of the current year for the Nigerian Monetary Authority to become so enthusiastic and ecstatic about introducing the eNaira in such a short period.
As previously stated, the eNaira, an online currency that is known to also be based on blockchain technology, has been created to serve as a supplement to the physical naira while also having the same value as the actual naira. As intended by its design, the eNaira platform is intended to house eNaira wallets for various stakeholders like merchants and customers.
As per the President, the eNaira is predicted to contribute to a $29 billion increase in the country’s GDP over the next 10 years. Wow, that’s a lot of excitement. However, considering the various barriers that still stand in the way of the eNaira’s functioning, this assumption seems to be more of a pipe dream than a really achievable objective. There has been no indication from the government as to how this fantasy of such a big boost in GDP would materialize over the course of the next several years.
So, for the time being, it appears to be pure speculation. It is difficult to determine whether the eNaira will be successful, or whether it will even be effective in tackling the fundamental concerns of national economic growth. As a result, it should come as no surprise that many people saw the launch as entirely diversionary. In the eyes of the undiscerning people, it seems to be intended to deflect attention away from the fundamental economic issues that the country is now experiencing. When combined with declining disposable incomes, inflation continues to rise. Meanwhile, the naira continues to depreciate against other currencies, and the poverty rate continues to rise, notwithstanding the general deterioration of other macroeconomic indices.
According to worldwide data, even the most advanced nations are not enthusiastic about the use of virtual currencies in their respective societies’ operations. Inside the United States, plans to introduce a “digital dollar” have been slammed as “primarily disruptive” by established participants in the financial industry and as “not really necessary” in the country’s economy. Skepticism about the future of industrialized economies is widespread. China, the world’s second-largest economy and the first to participate in the program, has just released a pilot form of the “digital renminbi,” while South Africa, Africa & Ghana are now in the testing phase for the eventual implementation of digital money.
The advantages of the eNaira, as described by the Central Bank of Nigeria, seem to be too optimistic and speculative in nature. Considerable advantages include issues such as improving the effectiveness of the monetary policy, increasing financial inclusion, encouraging a more effective payment system, increasing the capacity of the government to implement targeted social interventions, as well as increasing the number of remittances received.
However, several issues emerge in relation to these. First and foremost, how does it vary from the existing situation in terms of considerably facilitating payments for products and services? There are different payment alternatives available to consumers and producers who conduct various transactions. These possibilities range from cash to the usage of Point Of Sale (POS) terminals, where customers make payments for products and services and sales taxes may be due, among other things. Other payment options include bank transfers or other internet-enabled options, such as the (USSD) Unstructured Supplementary Service Data, which allows users who do not have a smartphone or a data/internet ability to connect to use mobile banking by entering specific codes into their mobile banking application.
Over time, these have made mobile banking more accessible in the nation, and they are now utilized for a variety of functions such as cash transfers, checking account balances, and creating bank statements, among others. When it comes to facilitating the payment platform in the nation, these solutions have not been extensively explored.
Consequently, what significant impact does the new eNaira make in the growth of the country’s financial system? Especially in light of the fact that cyber security concerns continue to be a recurrent difficulty even in industrialized countries with sophisticated technical infrastructure…
Why does the common Nigerian need this fresh invention as a part of their economic well-being, when their major concern is supporting themself and their family? The most likely scenario is that this innovative technology will be implemented in the future, after which time will be spent strengthening its operation in order to ensure its security and reliability. It’s possible that these skepticisms regarding digital currencies may persist for some time. They can be found even in the most sophisticated economies. Is it possible for Nigeria, which has limited technical capacity and infrastructure, to overcome these problems while also dealing with skepticism? These are the kinds of concerns that the CBN should be concentrating on.
The rollout seems to be mostly for the purpose of diverting attention. A better option for the fiscal and monetary authorities would probably be to concentrate their efforts on reviving the country’s economy. It is this, more than the introduction of digital money, that would bring joy to the typical Nigerian citizen’s heart.
Even if the existing payment system is beset with difficulties, it is nonetheless capable of supporting the operation of a Nigerian economy. Improvements in its operation, as well as a progressive implementation of an eNaira plan, might well go hand in hand with one another.