But the phenomenal rise in popularity of all forms of digital currencies, like crypto in recent times posed a threat to that authority, control and power of Central banks over the circulation of currency.
CBN and “endless possibilities” of its eNaira
Central Banks across the world have the mandate to control the circulation and supply of currencies, and the Central Bank of Nigeria (CBN) is not an exception.
Over the years, bitcoin, dogecoin, and many other cryptocurrencies had become strong attraction to people, mostly youths across the globe.
The popularity and wide acceptance of cryptocurrencies stemmed from the high returns that they seemed to attract over a short period of investment.
However, over time, it became clear that cryptocurrencies were susceptible to certain financial vulnerabilities and abuse.
This informed the initiative of the Central Bank Digital Currency (CBDC) by financial regulatory bodies across countries.
The Central Bank Nigeria (CBN) announced a ban on cryptocurrency transaction within the Nigerian banking system in February, 2021, while revealing plans to float its own CBDC, the eNaira.
Mr Godwin Emefiele, the CBN Governor, had explained that cryptocurrencies promoted the risk of loss of investment, money laundering, terrorism financing, illicit funds flows and other criminal activities.
Emefiele announced the introduction of the eNaira, which was eventually launched by President Muhammadu Buhari in October 2021.
The apex bank described eNaira as the Nigerian digital currency that is issued and regulated by it.
“Its functionality delivers speedy, safe, and simple trading and transactional opportunities to customers and end-users,” CBN stated.
It disclosed that all transactions conducted on the newly-launched digital currency platform would be free for 90 days.
The CBN also said that Ministries, Departments and Agencies could make payments and collect revenues using the eNaira wallet.
According to Emefiele, the eNaira would 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.
He assured financial institutions in the country that eNaira was not a subtle scheme to take away bank customers.
He said the plan was to grant access to more financially excluded people.
“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.
“It opens up a whole new market of digital currency users for financial institutions to increase their customer base and add value to their account owners,” he said.
During the launch in Abuja, the CBN governor announced that 33 banks were fully integrated and lives on the eNaira platform.
“Since the eNaira platform went live, there has been overwhelming interest and encouraging response from Nigerians and other parties across the world with over 2.5 million daily visits to the website.
”N500 million has been successfully minted by the CBN, N200m has been issued to financial institutions, over 2,000 customers have been on boarded and over 120 merchants have successfully registered on the eNaira platform,” he said.
President Buhari said that the e-currency would help increase remittances, foster cross-border trade, improve financial inclusion, make monetary policy more effective, and enable the government to send direct payments to citizens eligible for specific welfare programmes.
According to him, the digital currency would help move many more people and businesses from the informal into the formal sector, thereby increasing the country’s tax base.
“In recent times, the use of physical cash in conducting business and making payments has been on the decline.
“This trend has been exacerbated by the onset of the COVID-19 pandemic and the resurgence of a new digital economy.
“Alongside these developments, businesses, households, and other economic agents have sought for new means of making payments in the new circumstances,” he said.
Meanwhile, economic and financial experts have said that the eNaira would not change or affect the value of the Naira in the foreign exchange market.
They also expressed concern over the risk of cyber-attacks on the eNaira accounts of Nigerians.
A financial analyst and Senior Lecturer at the Pan Atlantic University, Dr Olalekan Aworinde, said there was a need to do more to sensitise the public on the risks of the CBDC.
He said, “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”.
A Financial Expert and Past President of the Chartered Institute of Bankers of Nigeria (CIBN) Mr Okechukwu Unegbu, urged the CBN to consider the impact eNaira might have on the economy.
Unegbu advised the CBN to involve stakeholders from CIBN, ICAN, and other professional bodies to ensure that the financial sector does not get affected negatively as a result of the introduction of the digital currency.
Unegbu said, “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.
“If you bring out a product which the people cannot understand they will not be able to use it.”
An Economist, Dr Tope Fasua, described the idea of eNaira as a welcome development.
Fasua, who is the Chief Executive Officer of a consulting firm in Abuja, said that the idea of eNaira was commendable because all currencies would eventually become digital over time, adding that the Naira should not be left behind.
He noted that by creating the digital Naira, the apex bank was ensuring that it was not rendered irrelevant in the foreseeable future.
“In actual fact, the Naira is already digital as it is because, you can send money through Unstructured Supplementary Service Data (USSD) or through electronic transfer without the need to touch cash.
“But with the eNaira, digitalisation is going to higher level, where we will increase focus on electronic financial transactions, which will come with its own type of innovations and improvements.
“But only those who get on board will benefit from the advantages of the digital currency,’’ he said.
According to Fasua, electronic currencies, like the eNaira, allows central banks to print and manage less physical currencies, thereby saving huge revenue.
“It will benefit the Nigerian economy by saving huge cost of managing physical cash, and including more Nigerians in the financial sector.
“It will promote financial inclusion, as those who do not have bank accounts can easily key into the eNaira.
“It will also, eventually, help in tracking money laundering and fraud because it is all about documentation of what people are doing.
“The data that will be generated will enable authorities do their work better in preventing money laundering and fraud,’’ he said.
Some stakeholders, however, suggested that adequate sensitisation by government would improve the low acceptance level of the digital currency.
Others suggested that government should pave the way by using eNaira to pay existing welfare programmes.
“The Nigerian government should shift social welfare programmes and NYSC payments to eNaira for a start. That way, use will spike. They shouldn’t just expect us to start using it,” one user advised.
They, however, agree that the CBDC was still in its infancy and has a lot of growing to do.
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