The Nigerian government through its apex bank and banking regulator, the Central Bank of Nigeria (CBN) is set to launch on October 1, 2021, ‘eNaira’, the country’s Central Bank Digital Currency (CBDC), which will run on the Hyperledger Fabric Blockchain piloted through Project Giant since 2017. It is an electronic form of central bank money that citizens can use to make digital payments and store value.
This is coming at a critical time, where there is a rise in the adoption of digital currencies globally, such as Central Bank Digital Currencies (CBDCs), cryptocurrency such as Bitcoin, Namecoin, Litecoin, Dogcoin and Ethereum. Joining other countries such as China: Digital Yuan, Sweden: e-Krona, Bahamas: Sand Dollar, Eastern Caribbean Area; DXCD, Marshall Island: sovereign, Ghana: e-Cedi, who are championing CBD. CBN has realized the necessity to take charge and be at the revolution fore of the digital currency disruption.
The move to adopt eNaira by the CBN shows that if you cannot beat them, join them. CBN has been anti-cryptocurrency since its inception owing to its volatility and inability to regulate crypto. On February 5, 2021, CBN released a circular addressed to banks and other financial institutions with the directive that transactions in cryptocurrencies and facilitating payment for cryptocurrency exchanges were prohibited and all accounts transacting in cryptocurrency closed. The banned meant that the operations of cryptocurrency companies and all cryptocurrency activities in the country were illegal.
On August 30, the Central Bank of Nigeria (CBN) announced through a press release, the formal engagement of the global Fintech company, Bitt Inc., as the Technical Partner for the launch of eNaira. The CBN emphasized Bitt Inc key role in the successful launch of the CBDC Piot of the Eastern Caribbean Central Bank in April 2021 as one of the selection reasons. The CBN’s engagement of Bitt Inc at a critical time, where the Nigerian Fintech industry is thriving speaks volumes and discourages local content and innovation. It is hard to speak of an enabling environment when critical government projects are offered to a foreign company without patronization of Nigerian companies. Government needs to invest more in Nigerians and encourage local indigenous entrepreneurs.
What really is the eNaira and what effects will it have on the Nigerian economy? Will it deepen the governments cashless policy drive?
eNaira is a central bank digital currency (CBDC) issued by the Central Bank of Nigeria as a legal tender. Simply put eNaira is the digital form of the Naira with a direct liability on the Central Bank of Nigeria. The eNaira wallet on the other hand is a digital store for the eNaira and is required to access, hold, and use eNaira.
Its critical to further examine what the eNaira holds for Nigerians and the country, the eNaira promised to bring more possibilities as it will increase cross-border trade, increase financial inclusion as more citizens will have access to cheaper and easier bank accounts, ensure remittance inflows are fast and cheaper, increased demand for financial products and services, easier targeted social interventions, as well as improvements in monetary policy effectiveness, payment systems efficiency, and aid tax collection. In addition, the economic benefits of not having to mint and print physical currency. The eNaira will decrease fraudulent activities and create an easier oversight in the movement of funds and reduced risk of circulation of counterfeit Naira.
Other opportunities on the horizon are the eNaira will have the government backing and will position Nigerians to enjoy all the benefits of digital currencies. The CBN will be able to regulate the operations of the eNaira, which is not the case for cryptocurrencies because of its volatility and governments inability to control or regulate.
It is my belief that the eNaira will come with certain challenges, which are being faced by banks and other financial institutions, which the CBN must be proactive in addressing. These challenges include privacy concerns, cybercrime not limited to hacking, anti-money laundering and other fraud prevention measures and customer complaints and requests.
However, will the adoption of eNaira be the death of cryptocurrency adoption in Nigeria or will cryptocurrency still thrive in Nigeria? It is in my opinion that the adoption of the eNaira will not likely stop the adoption of cryptocurrencies but is likely to create a competitive between the two currencies with the possibility of the eNaira having a much larger adoption in Nigeria as it is the equivalent of the Naira in a digital form and viewed as a safe alternative.
The eNaira website www.enaira.com launched a week to the official launch had over a million visits and counting is proof of the anticipation of Nigerians to embrace eNaira. The eNaira app download will begin October 1.
Looking forward to the possibilities the eNaira will bring to the Nigerian economy.