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eNaira 40 weeks after: so far, so fair?

Indications are the much hyped electronic currency sponsored by the Central Bank of Nigeria (CBN) hasn’t received much acceptance across the board considering the slow adoption rate by the banks and other stakeholders.

In about two months’ time precisely on October 25 this year, it will be exactly one year since the new form of currency in the country, eNaira was  launched by President Muhammadu Buhari to be used as legal tender in the country.

Thus Nigeria became the first African country to introduce a digital currency as it joined the Bahamas and the Eastern Caribbean Central Bank in being among the first jurisdictions in the world to roll out national digital currencies.

But 40 weeks or exactly 10 months after the new legal tender still faces a crisis of identity of some sorts with many stakeholders treating it like a leper!

During the launch, the CBN Governor, Godwin Emefiele, noted that the introduction of the eNaira came after four years of research conducted by the apex bank.

The eNaira is a digital currency denominated in naira and serves as both a medium of exchange and a store of value, according to the CBN

The CBN governor said it integrated 33 banks into the eNaira platform with N500m successfully minted by the apex bank for the takeoff of the programme.

The regulator said while N200m had been issued to financial institutions, over 2,000 customers had also been on-boarded as of the time of the launch.

The CBDCs speed wallet app and merchant wallet also became available for download after eNaira went live.

As of December 2021, the eNaira consumer wallet recorded over 583,000 downloads while the merchant wallet was downloaded 83,000 times, with downloads occurring in over 160 countries.

The CBN also recorded over 34,000 transactions through the wallets amounting to over N188m, according to the apex bank’s Controller, Enugu branch, Ch’Edozie Okonjo.

Note at the period of its launch, the eNaira was projected to add $29 billion to the Nigerian gross domestic product (GDP) in the next 10 years, according to the government.

In the words of the CBN governor, “Transactions on the system has been superfast and remains free for now, by design.”

No easy passage for eNaira

Despite the high expectations and hype around the Central Bank of Nigeria’s digital currency- the eNaira- major retailers and vendors in the country are yet to adopt it 10 months after launch.

Checks by our correspondent across some chain stores and shopping outlets channels in some parts of the country showed that there is a rather slow adoption of the digital currency as a medium of exchange.

Cashiers at ShopRite and Spar who spoke on condition of anonymity because they were not authorised to speak on the matter, said they weren’t aware of the existence of the eNaira or how it would function.

Calls made to the customer service phones of e-commerce giants Jumia and Konga also revealed that no provision had been made for eNaira payment on these platforms.

The customer care agent of Konga however said, “We are working to ensure that this payment method becomes available. Once this is done, we will communicate it to our customers.”

A new report by Omaplex Law Firm said the acceptance of eNaira across the country is threatened chiefly by poor mobile networks and the limited spread of Internet-enabled devices.

The report which was titled ‘Omaplex 365: Nigeria 2022 socio-economic and technological outlook’, noted that, “This is so because in most rural regions of Nigeria, network penetration is still heavily dependent on 2G and 3G networks, which spells difficulty for eNaira transactions hinged on the Internet.

“Again, owing to the indigent status of a significant fraction of the Nigerian populace, owning Internet-enabled devices may be put on hold in favour of more immediate necessities.

“Accordingly, if the primary stated purpose of the creation and launch of eNaira is to promote financial inclusion, the highlighted issues may pose a threat to achieving that goal.”

According to the report, a further concern associated with the launch of the eNaira is the attendant cybersecurity threats that may arise.

It said, “Indeed, owing to the fact that the eNaira is essentially digital, the threats of cybercriminals, compromised networks, and possible data losses are all digital realities that must be tackled head-on.”

But eNaira usage is low because the eNaira app is split in two applications; eNaira speed wallet (non-business users) and eNaira speed merchant wallet, with both recording about 600,000 downloads combined as of November 27 as disclosed by the CBN boss.

Experiential marketing of eNaira

Worried by the slow adotion of the eNaira, the CBN knocked commercial banks across the country for not promoting the digital currency.

Officials of the CBN took turns at the CBN Fair which held in Kaduna and simultaneously in Kano, to explain the nitty-gritty of eNaira initiative to the public.

Head, Development Finance Department of the CBN, Aminu Muhammad, an assistant director, said financial institutions under the purview of the CBN were supposed to play these critical roles in growing our economy.

Muhammad said the commercial banks were not effective in promoting the eNaira.

Interestingly, as part of efforts aimed at achieving massive eNaira adoption, the CBN in collaboration with the Bankers Committee recently conducted an eNaira road show at Balogun and Tejuosho markets in Lagos State.

The team, comprising CBN staff and representatives of some commercial banks, landed at Balogun market recently at Tejuosho market in Yaba all in Lagos.

The road show featured assisted downloads for market men and women, dance competition, eNaira branded gift items like power bank, cups, T-shirts and other electronic devices.

The team of experts on hand commended the traders for the interest they showed by massively downloading the eNaira apps.

However, they identified a mismatch in the date of birth used by some bank customers as one of the hitches experienced but was promptly attended to.

The highlight of the event was the arrival of Kunle Afolayan, a Nigerian actor, film producer and film director.

Detailing the usefulness of eNaira, Afolayan said that it has the full backing of the CBN and represents everything the paper Naira represents.

On the acceptability of eNaira, the movie star said, “eNaira is the way to go now, because a lot of people don’t want to move around with liquid cash. And it’s a very good platform for customers and buyers as well. It is mainly for people that are into business because sometimes even when you order stuff and the money doesn’t get delivered on time, eNaira will solve that problem by just a sharing of code between the buyer and the seller as well.

“All you need to do is just communicate with who you are transacting with.  And like I said, it’s a big world now.  A lot of people are dealing in cryptocurrencies and all that. So this is our own version of it. It is safer. It is the best; very easy to operate. It is like a one speed dial and all problems are solved,” he stated.

Afolayan added that the eNaira is real and risk-free. He said the CBN has made the app easy to download for active users and has improved on its website so as to make e-Naira digital wallet feasible and easy for the youths to use in building enduring livelihood that would transform into socio-economic development of the nation

IMF raises reflags over e-Naira

According to the IMF managing director, Kristalina Georgieva, central bank digital currencies (CBDCs) like eNaira are a better bet than cryptocurrencies.

She said, “In order to become familiar with the bits and bytes of digital money, central banks are getting to work.

“We don’t yet know how far and how fast CBDCs will go, since they are still in their infancy. As a result, central banks are building up their ability to harness new technologies – so that they will be ready for whatever lies ahead.”

There are about 100 or so countries that are exploring CBDCs with support from the IMF.

The global creditor in an about turn however admitted that the eNaira may cause money laundering and financing of terrorism

In its staff country report titled ‘Nigeria: 2021 Article IV Consultation’, IMF stated that new activities related to money laundering and terrorism financing will spring up should the CBN deploy eNaira for cross-border fund transfers and agency bank networks.

“Prospective expansion of eNaira use to cross-border fund transfers and agency bank networks may cause new money laundering/financing of terrorism (ML/FT) risks”, the report stated.

IMF also asserted that operational risk, such as legal issues between wallet providers and CBDC holders, might trail the usage of eNaira, which is still struggling to appeal to person-to-merchant or merchant-to-person.

“Unforeseen legal issues, including for private law aspects of its operations (e.g., the exact nature of legal relationship between the wallet providers and CBDC holders), may subject eNaira to litigation and operational risks”, IMF stated.

Allaying fears of Nigerians over e-Naira

Giving insights on the benefits of the eNaira, Dr. Iwa Salami, Associate Professor in Law at the University of East London, who shared her candid thoughts with an online platform recently, said there is a need to educate Nigerians on the difference between the digital representation of cash deposits in bank accounts and the eNaira in digital wallets.

While a plausible explanation about a digital currency as a means of payment or money that exists in a purely electronic form, she said, central bank digital currencies are issued and regulated by the nation’s monetary authority, or central bank, and backed by the government. “They are different from existing electronic central bank money, which is provided by central banks but can only be used by banks and selected financial institutions. When financial institutions pay each other, they pay in reserves from accounts held with a central bank.”

According to her, “Before central bank digital currencies, the only way consumers could use money that is a direct liability of a central bank was with physical cash. Existing digital retail payment from customer deposits accounts in banks are based on money that is the liability of the institution providing the account, not a central bank. A central bank digital currency is a direct liability on the central bank and is available to all households and businesses giving them access to electronic central bank money.”

Nigeria’s digital currency will be the digital form of the Naira and will be used just like cash.

A central bank digital currency, she further stressed, “is not a cryptocurrency. Cryptocurrencies, such as Bitcoin, are not currencies in most countries since they are not a generally accepted form of payment. Although they are still widely referred to as cryptocurrencies, they are best described as digital assets, or crypto-assets.”

However, since the eNaira is non-interest bearing and the Central Bank can place transaction and balance limits on certain eNaira wallets, this risk is minimised.

“The second risk is operational. For example, if IT systems were to fail or if there were technological glitches, or cyber-attacks. These can compromise user privacy. The Central Bank will need robust technology and IT security systems. Closely linked is reputational risk to the Central Bank if the operational risks materialise. They are likely to have a huge impact on its credibility and reputation both domestically and globally.

“When the Central Bank takes on this new function – issuing the eNaira and maintaining a central ledger of all transactions – it might find it harder to perform its key function of ensuring a safe and sound financial system since its focus could be diverted towards managing the eNaira system in addition to carrying out its other functions in the domestic economy.

“A possible way to lighten this burden is through creating synthetic central bank digital currencies. This idea was put forward in 2019 in an International Monetary Fund paper. In such a system, the central bank does not directly manage the system, but outsources tasks to private institutions. Financial institutions issue the digital currency, which is fully backed by central bank money.”

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