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eNaira goes live as CBN floats new scheme to boost economy

By Collins Olayinka, Terhemba Daka (Abuja) and Rotimi Agboluaje (Ibadan)
26 October 2021   |   4:13 am
At exactly 1:00 p.m., yesterday, Nigeria’s Central Bank Digital Currency (CBDC), the eNaira, went live after it was launched by President Muhammadu Buhari at the State House in Abuja.

Vice President Yemi Osinbajo (left); President Muhammadu Buhari and Central Bank Governor Godwin Emefiele during the launch of eNaira at the State House, Abuja…yesterday. PHOTO: PHILIP OJISUA

• 33 banks join platform, CBN mints 500m
• Transactions on eNaira free for 90 days
• Buhari insists on close monitoring, says digital currency will boost GDP by $29b
• CBN says foreign reserve surpasses $40 billion

At exactly 1:00 p.m., yesterday, Nigeria’s Central Bank Digital Currency (CBDC), the eNaira, went live after it was launched by President Muhammadu Buhari at the State House in Abuja.

The eNaira was developed by fintech company, Bitt, which is also behind the creation of CBDC in some East Caribbean countries.
The Central Bank of Nigeria (CBN) governor, Godwin Emefiele, said 500 million eNaira has already been minted, adding that 33 banks have been fully integrated and are live on the platform.

The digital currency app and its merchant wallet are now live and available for download. The two apps, eNaira speed wallet and eNaira merchant wallet, are available on Google playstore and Apple store. As at 7:00 p.m. last night, the app had crossed 10,000 downloads on playstore.

The CBN has also published regulatory guidelines of the currency on its website. “The guideline seeks to provide simplicity in the operation of eNaira, encourage general acceptability and use, promote low cost of transactions, drive financial inclusion while minimising inherent risks of disintermediation of any negative impact on the financial system.”

The apex bank also said all transactions conducted on the platform would be free for the next 90 days. It, however, stated that it would revert to its guide on applicable charges by banks and other financial institutions at the end of the stated period.

The CBN stated that Electronic Funds Transfer below N5,000 is charged N10; N5,001 – N50,000 is charged N25 and for above N50,000, a N50 charge is associated.

The bank also said phone numbers without verified National Identification Number (NIN) will have a daily transaction limit of N20,000, while the maximum that the account can hold is N120,000. For phone numbers with verified NIN, CBN said they have a daily transaction cap of N50,000 and a maximum balance of N300,000.

Emefiele, who disclosed that over 2.5 million people visit the website daily, said another N200 million has been issued to financial institutions. Over 2,000 customers have been onboarded and 120 merchants have successfully registered on the platform, he added.

The CBN, he said, “will continue to refine, fine-tune and upgrade the eNaira” and he assured that “Nigerians should expect to see additional functionalities in the coming months.”

Some of the additional functionalities include: accessibility and onboarding of customers without BVN and the use of eNaira on a phone without Internet to further drive financial inclusion, making Nigeria one of the first countries in the world to deploy the CBDC via USSD on phones without relying on internet connectivity.

Another feature that will be deployed by the eNaira is the “onboarding of revenue collection agencies to increase and simplify collections and the creation of 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.”

WITH the launch, President Muhammadu has insisted that close monitoring and supervision will be necessary in the early stages, adding that it will be necessary to also study the effects of the eNaira on the economy as a whole.

The President declared that the adoption of CBDC and its underlying technology, called block chain, can increase Nigeria’s GDP by $29 billion over the next 10 years.

President Buhari added that alongside digital innovations, CBDCs can foster economic growth through better economic activities, such as increase in remittances and cross border trade, while it will enable government to send direct payments to citizens eligible for specific welfare programmes.

‘’The use of CBDCs can help move many more people and businesses from the informal into the formal sector, thereby increasing the tax base of the country,’’ he said.

He commended Emefiele, his deputies and the entire team of CBN who worked to make the launch of Africa’s first digital currency a reality.

The President also used the occasion of the unveiling to explain why he approved the use of digital currency.
‘’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 COVID-19 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.

‘’The absence of a swift and effective solution to these requirements, as well as fears that Central Bank’s actions sometimes lead to hyperinflation, created the space for non-government entities to establish new forms of ‘private currencies’ that seemed to have gained popularity and acceptance across the world, including here in Nigeria.

‘’In response to these developments, an overwhelming majority of Central Banks across the world have started to consider issuing digital currencies to cater for businesses and households seeking faster, safer, easier and cheaper means of payments. A handful of countries, including China, Bahamas, and Cambodia have already issued their own CBDCs.

‘’A 2021 survey of Central Banks around the world by the Bank for International Settlements (BIS) found that almost 90 per cent are actively researching the potential for CBDCs, 60 per cent were experimenting with the technology and 14 per cent were deploying pilot projects.”

BUT experts and cryptocurrency users in the continent’s biggest economy say the fact that there are more questions than answers regarding the eNaira and a large amount of worry over the consistency of CBN rules, means the government faces a tough path to make the eNaira a success.

Nigeria’s young and tech-savvy population has eagerly adopted digital currencies. Cryptocurrency use has grown quickly despite a Central Bank ban in February on banks and financial institutions dealing in or facilitating transactions in them.

Some of what drove Nigeria’s enthusiastic adoption of cryptocurrencies was the CBN’s own shifting rules regarding access to foreign currencies and the naira’s plunging value on parallel markets that saw savings shrink.

Ikemesit Effiong, head of research with SBM Intelligence, said: “It’s not clear looking at the CBN’s body of work that Nigerians would be comfortable using this.”

He added that the CBN had not yet made clear whether users could transfer eNaira back into traditional naira, whether they could use cryptocurrency to buy or sell the eNaira or even whether there would be physical locations to use and transfer eNaira, or whether it would be entirely digital.

Dr. Muda Yusuf, an economist and CEO, Centre for the Promotion of Private Enterprise (CPPE), said eNaira is consistent with current digitalisaton trend across all sectors globally, “but it is still not clear what the value proposition of the eNaira is, beyond the psychological satisfaction of joining the league of countries with digital currencies.
 
“Digital applications typically come with efficiency, cost effectiveness, smartness in usage and convenience. Perhaps, it is still early days. It may be necessary to allow the scenario to fully unfold.  

“However, the first major worry is the issue of security and vulnerability to cybercrimes. The second is the pace of adoption having regards to the level of literacy and the huge informal economy.   

“The truth is that as a country, we have witnessed amazing transformation in the payment system space. The use of electronic payments, use of POS, ATM machines, mobile money transfers, debit and credit cards have gained tremendous traction and confidence among citizens. Transactions on these platforms are already in trillions of naira, and still counting. It remains to be seen what additional value the eNaira will bring.”   

A former banker and finance lecturer at Babcock University, Ilisan-Remo, Ogun State, Dr. Yinka Akintunde, lauded the launch. Speaking with The Guardian in Ibadan, Akintunde said: “The launch is just in a dimension of going with the trend in the digital world. This is expected to boost the economy as it makes purchases and exchange faster. It holds the potential of bringing the market at your fingertip.

‘’I think we should give this a trial considering the potential benefits and the expected ease of transfer and making of payments. However, the CBN has to look greatly into the aspect of security of this app.”

This same sentiment was echoed by an accounting, management and entrepreneurship lecturer, Prof. Olajumoke Familoni, who said: “The eNaira will complement the physical note. It will boost trade and facilitate transactions better.”

AS the economy struggles to gain stability, the CBN has unveiled a ‘100 for 100 Policy on Production and Productivity’ to rejig the economy.

The new financial instrument, it says, will support companies to boost local productivity, create wealth and stave off importation responsible for Nigeria’s foreign exchange crisis.

The 100 for 100 PPP initiative will empower 100 companies in 100 days, and hundreds more in the coming months. Emefiele said the move is to reverse the country’s over-reliance on imports.

The bank has launched several initiatives in recent years to support Nigeria’s private sector, as it battles an importation-fuelled foreign exchange crisis that has sent the Naira crashing over 30 per cent in the last one year.

Last week, it launched new loans for university and polytechnic graduates who are willing to set up businesses. Beneficiaries targeting information and computer technology, agriculture and food processing, and creative arts can receive between N5 million and N25 million.

Emefiele said the new PPP initiative will be anchored in the Development Finance Department of the bank under his direct supervision.

Under this policy, he said the CBN will advertise, screen, scrutinise and financially support 100 targeted private sector companies in 100 days, beginning from November 1, 2021, and rolling over every 100 days with a new set of 100 companies, whose names are going to be published in national dailies for Nigerians to verify and confirm.

The CBN governor said despite orthodox measures to save the downward slide of the Naira in the last 35 years against major currencies of the world, especially the U.S. dollar, it was now clear that production holds the ace to a strong Naira and reverse the country’s over-reliance on imports.

“We believe that if we target and support the right companies and projects, we will see a significant, measurable and verifiable increase in local production and productivity, reduction in certain imports, increase in non-oil exports, and improvements in the FX-generating capacity of the economy,” he said.

Emefiele maintained that the new steps are the only sustainable ways to grow the economy, saying, “this, in my view, is the best and most sustainable way to address Naira’s value – whether in hard currency or digital eNaira – through production, production and more production.”

He also dispelled fears about the nation’s foreign reserves, saying the reserves are strong and getting stronger by the day.

“There have been continuing debate on the true value of the Naira. Rather than worry today on the direction of the exchange rate, let us take a step back and analyse how we got here in the first place.

Since the advent of the International Monetary Fund (IMF)-led Structural Adjustment Programme (SAP) in 1986, the Naira has been on a one-way free fall from parity to the U.S. Dollar.

‘’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 has 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?

‘’Under your leadership, Mr. President, 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.

‘’As custodians of your national reserves, let me first assure you that there is no cause for alarm. Our FX reserves are strong and indeed getting stronger by the day, crossing the 40 billion USD mark, and is one of the highest in Africa – and growing.

‘’But we cannot fritter our 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.

‘’If you consume cheap imports and export our jobs, we will make you pay dearly; but if you produce locally – with little or no foreign inputs beyond machinery, we will support you, and the markets will reward you abundantly,’’ he said.

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