NIGERIA. Abuja: Under the slogan “Same Naira. More Possibilities,” President Muhammadu Buhari launched Nigeria’s new eNaira digital currency on Monday, October 25th. According to CBN head Godwin Emefiele, 500 million eNaira worth $ 1.21 million have already been minted.
In the event streamed live from Abuja, President Buhari said that the acceptance of the Central Bank Digital Currency (CBDC) and its technology advantages called blockchain Canis will help in increasing Nigeria’s GDP by $ 29 billion over the next decade.
The background of eNaira’s launch
Nigeria, the first African economy is also the largest economy and the most populous country on the continent. The Central Bank of Nigeria (CBN) is the sole issuer of legal tender money throughout the Federal Republic of Nigeria.
The Naira (sign: ₦; code: NGN), Nigeria’s official currency, got gradually depreciated in oil transactions, and was scheduled for redenomination in August 2008. At that time, the CBN began weekly foreign exchange auctions at their exchange rate. This practice was said to be gradually phased out but continues up to date.
According to a statistical study conducted by Statista, in 2020 Nigeria ranked as the third largest user of virtual currencies in the world after the United States and Russia. In the same study, Nigeria’s percentage of respondents who indicated they owned or used cryptocurrencies positioned the country at the top of the list.
In February 2021, the CBN banned crypto transactions within the banking sector as they tried to limit the use of decentralized payments. Yet, Nigerians found ways to trade in peer-to-peer trading.
In June, the CBN announced the introduction of eNaira as a central bank regulated legal tender (CBDC). The eNaira launch was postponed from October 1st to 25th as the country celebrated its 61st anniversary of Nigerian independence that same day.
What is eNaira
The eNaira is a Central Bank Digital Currency (CBDC) and direct liability of the CBN as it is the digital form of the physical Naira. Money in your bank account is Naira and is held as deposit liabilities by the financial institution.
Where to start with eNaira
The eNaira was developed by Barbados-based fintech company Bitt “with attention to every critical detail.” Apart from the possibility for you to use the website, two applications are available for download from the Google Play Android App Store and Apple iOS App store: eNaira speed wallet and eNaira merchant wallet.
Advantages of using eNaira
The main objective of using eNaira is to combat the high cost of living, unemployment, poverty and the impact of the coronavirus pandemic on world oil prices. Among others, eNaira will also:
- Ensure faster and more secure transactions.
- Reliable cashless payment option.
- Offer transactions at no charge.
- Reduce overall transaction cost.
- Limit loss in foreign currency exchange.
- Ease cross-border transfers.
- Put an end to or reduce inflation.
- Ensure monetary and price stability.
- Expand financial inclusion for people with no banking access.
- Aid targeted social interventions.
- Improve diaspora remittances.
- Escape depreciation of the naira.
- Increase revenue and tax collection.
- Minimize fraudulent activities and money laundering because of the “trackable unique ID of each eNaira.”
Downsides of using eNaira
The development of the eNaira platform began in August 2021 when CBN entrusted Bitt with the project. According to the general requirements of project management of such a scale, it is virtually impossible to bring to market a fully proven product that serves so many people sufficiently and reliably.
As every good thing has its bad side, we have performed rigorous testing to conclude that neither the apps nor the website is fully functional and well crafted enough to meet the current needs of Nigerians.
In this regard, the CBN claims to “have put a structure to promptly address any issue that might arise from the pilot implementation of the eNaira.” Nonetheless, Nigeria should be over ready for the challenges of eNaira as it will take time for the CBNC to become fully operational.
Independently from our testing, while eNaira is said to be “safe and secured with advanced cryptographic techniques … on a tiered KYC structure,” users continually report bugs and glitches and most say they give up after a few attempts to get it running.
One user says, “I tried to register and after telling me there’s issues verifying my BVN I lost interest. Was hoping to learn if there’s any advantage to the enaira by downloading the app. But looks so much like there really isn’t. Given the fact that the Nigerian government has let us down in more ways than we can count, this didn’t come as much of a surprise.“
Another user adds, “I wish I can rate this app 0 stars. How can I try to sign up on an official country commercial e currency app and it’s already giving me this error message stating that email cannot be blank, and yet there’s no place to fill out the email, secondly I have to be forced to use a 12/13 digit passport like 8 is not enough, we does this country like to stress people in all areas of life. This country can never get anything right for once at a first go.“
Among others, eNaira may also lead to:
- Governmental and/or CBN manipulation and abuse.
- More crypto crackdown and surveillance.
- Lower returns for investors compared to Bitcoin.
- CBN can still make decisions on behalf of the currency holders.
- Security risks.
Further adoption of CBDCs
In the Atlantic Council original report published in May 2020, only 35 countries were considering a CBDC. A July 2021 research conducted by Axios shows that about 81 countries are now exploring a CBDC.
7 countries have now fully launched a centralized digital currency: the Bahamas, Grenada, Saint Kitts and Nevis, Antigua and Barbuda, Saint Lucia, and now Nigeria. Ghana is testing its e-Cedi and also looking to launch its own CBDC soon.
Digital versions of central bank currencies (CBDCs) are done to limit decentralized cryptocurrencies and retain profits while remaining under strict governmental control. For countries such as Nigeria, they are good on paper but questionable when put to practice.