By Bassey Udo
The introduction of the Central Bank Digital Currency (CBDC) and its blockchain technology was in line with global trend in the search for a new swift and effective means of making payments, President Muhammadu Buhari has said.
The President was speaking in Abuja on Monday at the official launch of the Nigeria ‘s digital currency, the eNaira.
The launch has made the eNaira, the first digital currency by any country in Africa, and Nigeria one of the first in the world to introduce a Digital Currency to her citizens.
The President said the introduction of the eNaira was in line with recent trends in the world where the use of physical cash in conducting business and making payments has been on the decline.
The trend, he said, was made more urgent by the onset of the COVID-19 pandemic and the resurgence of a new Digital Economy.
With this development, he said businesses, households, and other economic agents have sought for new swift and effective means of making payments.
The President said part of the fears by the people demanding a new payment sysyem included the Central Banks’ actions that could result in hyperinflation.
Such fears, he said, encouraged non-governmental entities to establish new forms of “private currencies” and other forms of crypto currencies that appear to be popular and acceptable across the world, including Nigeria.
In response to these developments, he said most Central Banks across the world began to consider issuing digital currencies to cater for businesses and households seeking faster, safer, easier and cheaper means of payments.
Nigeria with three others
In launching eNaira, the President said Nigeria was joining a few other countries, like China, Bahamas, and Cambodia that have already issued their Central Bank Digital Currencies (CBDCs).
A 2021 survey by the Bank for International Settlements (BIS) showed that almost 90 percent of Central Banks around the world were actively researching the potential for CBDCs; 60 percent were experimenting with the technology, and 14 percent were deploying pilot projects.
To check the challenges that the issuance of eNaira may pose in the early stages, Buhari said close monitoring and supervision would be observed to study the effect of eNaira on the economy as a whole.
The President said the capacity of ths CBN as a leading innovator in the production of money and deployment of payment services for efficient transactions convinced him to approve the issuance of the digital currency.
He said the CBN has already invested heavily in creating a payment system ranked not only in the top ten in the world, but also as the best in Africa.
This payment system, he said, now provides high‐value and time‐critical payment services to financial institutions, and ultimately serves as the backbone for every electronic payment in Nigeria.
Also, the CBN, he said, supported several private‐sector initiatives to improve the existing payments landscape, and created some of the world’s leading payment service providers today.
He traced the effort to create a digital currency for Nigeria to 2017, with work intensified recently over the past several months between the Ministries of Communication and Digital Economy and other agencies like the Nigerian Communications Commission, to integrate banking softwares across the country to ensure the safety of the CBDC System.
Benefits of eNaira
On the benefits of the eNaira to the Nigerian economy, the President said he believed the use of CBDCs could help move many more people and businesses from the informal into the formal sector, thereby increasing the tax base of the country.
Apart from digital innovations, he said CBDCs could foster economic growth through better economic activities.
“Indeed, some estimates indicate that the adoption of CBDC and its underlying technology, called blockchain, can increase Nigeria’s GDP by US$29 billion over the next 10 years,” he said.
“In addition, CBDCs can also 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,” the President said.
The eNaira, the CBN said, has evolved through six identifiable stages, including the Barter System, Commodity Money, Metallic Money, Paper Money, Credit Money, and Electronic Money.
eNaira leads Africa
In his remarks, the CBN governor, Godwin Emefiele, acknowledged Nigeria as the operators of one of the most advanced payment systems in the world and the best in Africa, befitting of the country as the largest economy in Africa.
He said considering the growing interest in CBDC around the world, the CBN commenced extensive study, consultations, identification of use cases and the testing of the the concept of a digital currency in 2017.
This, he said, was to enable a more prosperous and inclusive economy for all Nigerians.
Following the completion of the preliminary work, Emefiele said the researchers and experts at the CBN were able to establish that a digital currency would drive a more cashless, inclusive, and digital economy and complement the gains of previous policy measures and fast growing payments platforms.
He said the CBN believed the eNaira would make a significant positive difference to Nigeria and Nigerians, b supporting a resilient payment system ecosystem encouraging rapid financial inclusion, and reducing the cost of processing cash.
Besides, he said eNaira would enable direct and transparent welfare intervention to citizens; increase revenue and tax collection; facilitate diaspora remittances; reduce the cost of financial transactions, and improve the efficiency of payments.
eNaira, same Naira
The eNaira, the CBN governor said, is the digital equivalent of the physical Naira.
“The eNaira is the same Naira with far more possibilities. The eNaira – like the physical Naira – is a legal tender in Nigeria and a liability of the CBN.
“The eNaira and Naira will have the same value and will always be exchanged at 1 Naira to 1 eNaira,” he said.
To de-risk the process, Emefiele said the CBN considered the entire payments and financial architecture designing the eNaira to complement and strengthen these ecosystems.
The eNaira, he said, has beenl implemented with secure safeguards and policies to maintain the integrity of the country’s financial system.
Specifically, the CBN governor said, there would be strict adherence to the anti-money laundering and combating the financing of terrorism (AML/CFT) standards, to preserve the integrity and stability of Nigeria’s payment system.
Since the eNaira platform went live, Emefiele said Nigerians and others across the world has received the digital currency positively.
So far, he said 33 banks have fully integrated on the platform; N500 million successfully minted by the CB; N200 million issued to financial institutions, whil over 2,000 customers have been onboarded, and over 120 merchants registered on the eNaira platform.
Describing the eNaira as the start of a journey, like most digital revolutions, he said the CBN would continue to refine, fine-tune and upgrade the system regularly.
He urged Nigerians to expect additional functionalities in the coming months, includin accessibility and onboarding of customers without BVN, and the use of the eNaria on the phone without the internet.
These services, he said would further drive financial inclusion, make Nigeria one of the first countries in the world to deploy the CBDC via USSD on phones without relying on internet connectivity.
Onboarding of revenue collection agencies to increase and simplify collections; create sector-specific tokens to support the Federal Government’s social programmes and distribution of targeted welfare schemes in a bid to lift millions out of poverty by 2025
On the services to enjoy by customers, Emefiele said those who successfully downloaded the eNaira Speed Wallet App would be able to onboard and create their wallet, fund their eNaira wallet from their bank account, transfer eNaira from their wallet to another wallet and make payment for purchases at registered merchant locations
“Since the advent of the International Monetary Fund (IMF) led Structural Adjustment Programme (SAP) in 1986, and the introduction of the Second Tier Foreign Exchange (SFEM) market, the Naira has been on a one-way free fall from parity to the US Dollar in 1984 to over N410/USD today.
“Some 35 years later, we have not been able to achieve the many promises and objectives of that programme. Instead, what we have seen is widespread import dependency, which have wiped out most of our production and manufacturing bases and exported all our jobs in the process.
“What has happened to the massive textile factories across our nation such that we import almost all cotton products when we are rich in cotton?
“What has happened to our vehicle assembly plants across the nation such that we import most vehicles and have become a massive dumping ground for dying second-hand vehicles?
“What has happened to our rubber plantations through which we made the best tyres and rubber products in the world?
“What has happened to our groundnut pyramids? What has happened to our Cocoa farms? What has happened to our palm oil mills?
“We must stop this decline for good! We must return to massive homemade production; we must get our people working again. We must create the economic environment for massive domestic production and significant non-oil exports,” the CBN governor said.
He as custodians of the country’s national reserves, the CBN would ensure there was no cause for alarm, as the country’s foreign exchange reserves are strong and indeed getting stronger by the day, crossing the $40 billion mark, and is one of the highest in Africa – and growing.
He warned against frittering the reserves away on cheap imports and currency speculators.
“We must return to an employment-led growth anchored on productivity and rewarding producers of local goods, services, innovation and new technologies.