The Central Bank of Nigeria (CBN) just unveiled the E-Naira, a digital version of the country’s currency, on October 25th, 2021, under the theme Same Naira, More Possibilities, with the goal of lowering physical money circulation and improving financial inclusion.
The implementation of the E-Naira has the potential to transform the Nigerian economy and provide major advantages to businesses, individuals, and the government. One of the most significant advantages of the E-Naira is its ability to improve financial inclusion in Nigeria. Many people in rural or remote places may not have access to traditional banks, but they may send and receive payments using digital wallets. This will allow individuals to take a more active role in the economy, perhaps leading to higher economic growth and development.
Upon the introduction, Central Bank Governor Godwin Emefiele stated that there had been “overwhelming interest and encouraging response,” adding that 33 banks, 2,000 clients, and 120 merchants had successfully registered with the platform, which is accessible via an app for Apple and Android. The usage of the currency, according to President Muhammadu Buhari, could boost the economy by $29 billion over the course of 10 years, permit direct government welfare payments, and even broaden the tax base. The Central Banks’ goal of taxing and controlling citizens through Central Bank Digital Currency (CBDC) cloaks in the shadow aside from external pressure from international financial institutions.
However, the launch of Nigeria’s E-Naira, which is the first in Africa, is yet to answer the key questions regarding the exchange of the E-Naira for traditional fiat, transfer of E-Naira, funding of E-Naira wallet from banks and use of E-Naira to purchase cryptocurrencies. The E-Naira Speed Wallet is the digital wallet to store and transfer E-Naira for daily economic activities equally has technical problems with 2.5 and 3.0 ratings on both Android and Apple Stores respectively.
Users have faced several challenges with the functionality of the E-Naira Speed Wallet which has proven to be frustrating and unreliable.
The popular saying that, ‘good ideas don’t require force’, has been realized since the launch of Bitcoin and several other cryptocurrencies including Cardano, Polkadot, Ethereum, and Binance among others. The spread and adoption of cryptocurrencies do not have the coercive powers of law and because they provide quality value and utility, their adoption has been voluntarily marvelous.
On the other hand, CBDCs like E-Naira require the force that curtails the civil liberty of citizens to flourish. It is therefore not surprising when the Central Bank of Nigeria (CBN) placed a limitation on withdrawing for economic activities. The CBN set a revised weekly withdrawal limit of N100,000 ($220) for individuals and N500,000 ($1100) for corporations. Cash withdrawals from ATMs are only permitted in amounts of N20,000 ($50) per day and N100,000 ($220) per week. Any withdrawals made in excess of the limitations may incur fees. Individuals and corporations may withdraw up to N5,0000,000 ($10,900) and N10,000,000 ($21220) once a month for valid purposes, subject to costs.
These regulatory are undoubtedly coercive measures to roll out a cashless economy in Nigeria with E-Naira.
Cash withdrawal limitations have also created hardship and frustration for certain people who rely on cash for transactions. This has harmed people who do not have access to digital payment methods or prefer to conduct their transactions in cash. The restrictions have also been criticized for limiting consumer choice and making it more difficult for consumers to access their own funds. The limitation also caused bank runs as customers were desperate to withdraw their funds before the implementation deadline. Nigerians took to the street in protest and rejected E-Naira while demanding for physical Naira.
What is ironic is that, despite the rollout of the E-Naira, the CBN has rolled out to print more fiat and attempt to outlaw old notes only took the intervention of Supreme Court of Nigeria on grounds that there has not been enough public notice.
There is still work to be done to enhance awareness of the benefits of digital currencies and to remove the barriers to their adoption. The continuing development and refinement of digital payment systems, especially E-Naira, will be vital to increasing Nigerians’ trust and confidence in digital money. However, this cannot be achieved if E-Naira will exist in isolation from other digital currencies including cryptocurrencies. The Central Bank of Nigeria should serve as a bridge between cryptocurrencies and E-Naira. It would be helpful to provide value with CBDCs and provide verifiable answers to privacy, control, and financial freedom rather than to seek to use laws to force adoption.
E-Naira failures could serve as lessons to countries seeking to launch CBDCs. African countries should not be compelled to launch CBDCs and use their resources to maintain a stable economy as well as leverage digital opportunities to curb the rising unemployment among the youth.
