When the Central Bank of Nigeria (CBN) introduced its digital currency, the eNaira in October 2021, the idea was to create an alternative to the fast growing cryptocurrencies being patronised by Nigerians.
According to European Central Bank, e-money, broadly speaking, is an electronic store of monetary value on a technical device that may be widely used for making payments to entities other than the e-money issuer.
The bank said e-money products can be hardware-based or software-based, depending on the technology used to store the monetary value.
Central banks across the world, including CBN, have the mandate to control the circulation and supply of currencies. However, the phenomenal rise in acceptance of all forms of digital currencies poses a threat to that authority.
In recent years, bitcoin and other cryptocurrencies have become attractive to young people globally mainly due to their high returns over a short period of investment.
However, experts say cryptocurrencies are susceptible to certain financial vulnerabilities and abuse.
To counter this, the CBN in February 2021 announced a ban on cryprocurrency transaction within the Nigerian banking system. In their place, the apex bank unveiled plans to float eNaira.
At the unveiling ceremony President Muhammadu Buhari said that the initiative would help increase remittances, foster cross border trade, improve financial inclusion, make monetary policy more effective”, among others.
Mr Godwin Emefiele, the CBN Governor, in a recent media report assured that eNaira will open up a whole new market of digital currency users for financial institutions to increase their customer base and add value to their account owners.
“The framework of eNaira is such that it entrenches many pipelines of collaboration and further strengthens financial institutions core service delivery.
“By its very nature with regards to its mandates, eNaira enhances the structures of these institutions instead of replacing same”, Emefiele said at a recent “eNaira Hackathon” event.
At the event, a collaborative initiative between the CBN and the African Fintec Foundry (AFF), Emefiele announced that the digital currency had recorded 200,000 volumes and four billion Naira value of transactions since its inauguration.
The CBN governor also said that the eNaira had reached 840,000 downloads, with about 270,000 active wallets comprising more than 252,000 consumer wallets and 17,000 merchant wallets.
“ I am pleased to inform you that Nigerians, both banked and unbanked, will be able to open an eNaira wallet and conduct transactions by simply dialling *997 from their phones,” he said on the ease of operating eNaira.
According to Mr kingsley Obiora, Deputy Governor, Economic Policy, CBN, Nigerians should embrace eNaira because of it is convenient to use.
Citing the case of South Korea, he said: “In south Korea, 77 per cent no longer use cash to do payment, while in the Philippines it is 30 per cent.
“In Nigeria, we are also seeing the same decline in the use of cash, the minting of currencies in the CBN has been reducing in the last couple of years”.
An Economist, Dr Tope Fasua, and Chief Executive Officer of Global Analytics Consulting Limited described the idea of eNaira as a welcome development.
Fasua said that the idea of eNaira was commendable, projecting that in the future, digital currencies will be dominant other currencies.
However, Brookings Institution in a report advised that electronic currencies should be approached with caution.
“They could undermine the business models of conventional banks and their role in the financial system, making it hard for central banks—which operate largely through the banking system—to maintain financial stability”, the organisation warns.
Similarly, European Union in a report warns that widespread use of digital currencies would reduce the demand for central bank money and thus reduce the size of the balance sheets of central banks or profits of central banks will shrink, but not disappear.
Against this background, a financial analyst and Senior Lecturer at the Pan Atlantic University, Dr Olalekan Aworinde, said there was the need to further sensitise the public on the risks of electronic currencies.
“I think that the CBN should be aware of the fact that there is the risk of cyber-attacks with the introduction of the eNaira.
“As a result, the CBN needs to properly educate the masses on how to use the eNaira in a way that would not put their safety and the safety of their funds at risk,” he said.
This sentiment is shared by the past President of the Chartered Institute of Bankers of Nigeria (CIBN) Mr Okechukwu Unegbu, who advised the CBN to involve relevant stakeholders to ensure that the financial sector is not negatively affected as a result of the introduction of the eNaira.
The eNaira is another form of cryptocurrency which the CBN has banned, and it seems that the apex bank is trying to imitate what it banned.
“There is the need to do a thorough research and robust stakeholder engagement, with the CIBN, ICAN, and other relevant professional bodies, and also create adequate sensitisation on the eNaira”, he said.
As the CBN continues to make efforts to popularise the eNaira among Nigerians, adequate sensitisation is required to improve the acceptance level of the digital currency locally before it is internationalised.
Some experts suggested that government should show the way by using eNaira to for existing welfare programmes.
Others urged the government to shift social welfare programmes and NYSC payments to eNaira platforms to increase its acceptability among Nigerians.
