People & Money

Will Your Vulcaniser Use eNaira?

The eNaira has been in the news for a while. The Central Bank of Nigeria (CBN) first announced it would launch Nigeria’s digital currency on October 1st, 2021 but later postponed the unveiling in order not to, it explained in a statement, create distractions as the country celebrated its 61st Independence anniversary.  The apex bank then announced on 23rd October that the President, Major General Muhammadu Buhari, will formally unveil the Nigerian Central Bank Digital Currency, on Monday, 25th October at the State House, Abuja. This has happened as promised. 

About 80 m Nigerians live below the poverty line. Their cash travels daily from “hand to mouth”, bypassing all wallets, electronic, plastic or leather.

The launch of the eNaira is the culmination of several years of research by the Central Bank of Nigeria on how to advance the Nigeria’s payment system and make financial transactions easier and seamless for all Nigerians regardless of their socio-economic status.

According to the CBN Governor, Godwin Emefiele, the eNaira would make Nigeria “one of the first countries in Africa, and indeed the globe, to adopt the digitisation of its national currency“. The Central Bank of Nigeria had in February 2021 barred banks and financial institutions from dealing in or facilitating transactions in cryptocurrencies.

What is the eNaira? 

The eNaira is a central bank digital currency, or CBDC (Central Bank Digital Currency), issued by the government. It has the same value as the paper, or fiat, currency. CBDCs are different from cryptocurrencies as they are regulated and subject to banking laws. They are issued by a country’s central bank and are therefore trusted by traders. 

CBDC is a digital payment tool, denominated in the national unit of account. It is a direct liability of the central bank while cryptocurrencies are built on blockchain technology which ensures the decentralisation of their creation, regulation, and usage. 

It is important to note that eNaira has the same monetary value as the physical naira. Like the fiat currency, its value will equally rise or fall in relation to the dollar so the eNaira does not have a tendency to be as volatile as a cryptocurrency.

According to the CBN, the eNaira will stimulate trade and economic growth and make it easier to monitor transactions as well as boost revenue collection and financial inclusion. 

The CBN hopes the e-naira will help raise Nigeria’s financial inclusion from 64% to 95%, a goal which it thinks the almost universal ownership of mobile phones will make possible. On 29th September 2020, the CBN launched the Framework for Advancing Women’s Financial Inclusion in Nigeria. The Framework is a critical step in the efforts of the Central Bank of Nigeria towards closing the 8.5% financial inclusion gender gap in Nigeria and achieving 95% financial inclusion by 2024. 

Also Read: Amid Pandemic, Africa Shows Resilience

According to the CBN Governor, Godwin Emefiele, the revised National Financial Inclusion Strategy (NFIS 2.0) will focus on women, rural areas, and youth, Northern Nigeria and Micro Small and Medium Enterprises (MSMEs).  

It is stated in the framework report, “There are still large gaps in financial access for some of Nigeria’s most financially excluded groups. Women continue to be more financially excluded than men, with only 45% of women using formal financial services, compared with 56% of men. Adults in Northern Nigeria continue to be significantly more financially excluded than those in the southern zones, and rural adults are still more excluded than those in urban areas. Young adults, between the ages of 18-25, are significantly more likely than older adults to be financially excluded,”.

“Women’s financial inclusion is an important element in striving toward the broader goal of women’s economic and social empowerment. Financial inclusion is not an end in itself it is a means of improving livelihoods and fostering women’s economic and social empowerment”

The CBN plans to achieve 95% financial inclusion in less than four years with the introduction of eNaira. In June, the EFInA Access to Financial Services in Nigeria 2020 Survey released a report showing that while Nigeria targeted having 80% of citizens having access to formal financial services and products by 2020,  Nigeria achieved a financial inclusion score of only 64% by the end of 2020.  This means that 36% of Nigerian adults, or 38 million adults, remain completely unserved by formal financial institutions.   

The CBN says that the e-naira will help it achieve the 84% target of financial inclusion as Nigeria’s new digital currency was developed with simplicity and ease of use in mind. Nigerians without internet-enabled phones will be able to make transactions with the e-Naira. 

“On the digital economy, the Nigerian economy just like the rest of the world is going digital and cash cannot play in that space. Therefore, the e-Naira which will represent the digital equivalent of cash will be used as the fiat currency to effect transactions.

“And in terms of financial inclusion, we believe that over 30 percent of bankable adults are still outside the financial system. So, the ability to have offline payment through our e-Naira initiative will bring most of them into the formal financial sector,” Emefiele said.

Though the eNaira is being heralded as the silver bullet for Nigeria’s financial inclusion ambition, it is likely to face the same adoption barriers that excluded Nigerians have encountered since 2012 when the National Financial Inclusion Strategy was initiated. 

These challenges include high literacy rate, double digit inflation, increasing poverty and low-income levels. The 80 million Nigerians, 40% of the population, who live below the poverty line, spending only N607 per day, are unlikely to use eNaira. Their cash travels daily from “hand to mouth”, bypassing all wallets, electronic, plastic or leather. Besides, low levels of education mean they are uncomfortable with, intimidated by or distrustful of even the most basic technologies. Even in places like Lagos, Ibadan, Abuja, Aba etc., these socioeconomic factors prevent many artisans, taxi drivers and other informal sector works on low but higher incomes than rural dwellers from opening bank accounts. Only broader and deeper processes of socio-economic development can really create access to formal financial services and products for the most excluded Nigerians. 

Salau writes on business and the economy. 

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