CBN, Banks and Multifunctional Uses Of eNaira

There is growing certainty about the multiple uses of Nigeria’s e-currency, popularly known as the eNaira. This stems from the ever-expanding developments in digitalisation and the need for a secured means of effecting transactions across borders and continents worldwide.

The eNaira which was formally launched and introduced to the public by President Muhammadu Buhari on October 25, 2021, has thus far, gained international applause and recognition, courtesy of the ingenuity of the nation’s apex bank, the Central Bank of Nigeria (CBN), which had the foresight of ‘midwifing’ the currency in conformity with global monetary and transactional digital exigencies.

It is on record that globally, after the first Central Bank Digital Currency (CBDC) known as Sand Dollar was launched by the Bahamas in October 2020, Nigeria came second barely a year after with the launch of the eNaira.

For the avoidance of doubts, the CBDCs and, in fact, in this case- the eNaira is government-issued electronic money with the backing of the CBN to effect transactions in place of physical Naira (cash). It enjoys uninhibited acceptance as a legal tender. Thus, it has the inherent potential of providing higher resilience, safety, availability, and cheaper costs than private forms of digital money such as Bitcoin.

According to the latest CBN update, the eNaira, which is the digital form of cash used like cash is a direct liability to the CBN while the customers’ deposits are direct liabilities to the financial institutions. Its multiple functions are derived from the numerous objectives of enabling households and businesses to make fast, efficient, and reliable payments while benefiting from a resilient, innovative, inclusive, and competitive payment system. The benefits of the eNaira include but are not limited to being a fast, cheap, reliable, and available payment channel but it also supports the digital economy thereby improving economic activities.

In addition, the eNaira is also expected to simplify and ease cross-border payments and trade, enable the inclusion of the excluded in the financial system, improve the effectiveness of monetary policies, as well as ease tax remittance and collection to support the country’s growth

Aside from the inherent advantages of the eNaira to the public and users, the introduction of the nation’s digital currency does not entail usurping the customers of the commercial banks by the apex bank but rather building more synergy with financial institutions. The framework of eNaira is such that it entrenches many pipelines of collaboration and further strengthens financial institutions’ core service delivery just as it boosts access to more financially excluded people. By its very nature with regards to its mandates, eNaira enhances the structures of these institutions instead of replacing them.

The eNaira opens new frontiers of profitable partnership for progressive innovations by the Deposit Money Banks (DMB) and introduces a whole new market of digital currency users for financial institutions to increase their customer base and add value to their account owners. As the Financial Institutions act as bridges between customers and the CBN, this increased customer interaction stimulates the banks to adopt better customer support models. The CBN guarantees funds to the Financial Institutions with the eNaira Maximum Daily Cumulative Limit which restricts customers from total migration that may result in capital loss for financial institutions.

In terms of security, the eNaira has intrinsic security embedded design and integrated with the best fraud management system, which guarantees security of transactions and fosters customers’ trust. It seamlessly reduces the difficulties encountered on daily basis by financial institutions in the course of “Know Your Customers” (KYCs) processes. This is made possible with ease as eNaira gives every linked financial institution an access to the data base of customers with wallets domiciled in their banks.

The eNaira is same Naira but with more efficient possibilities. This is justified by the facts that with it, the users/customers can move money from their bank account to their eNaira wallet with ease. It is designed to assist customers to monitor their eNaira wallet, check balances and view transaction history as well as send and receive money faster at very minimal costs. Verifying of r payments and looking up of transaction history anytime, anywhere are also attributes of the e-currency.

According to statistics by the PwC Global CBDC and Stable coin Overview 2022 released in April 4, 2022, more than 80% of central banks are considering launching a CBDC or have already done so either for retail or wholesale payments. The report noted that Digital tender is already in existence in Bahamas and Nigeria while Jamaica and the Eastern Caribbean are expected to follow soon. Further, Nigeria eNaira is atop of other countries with 95 per cent in retail index as at 4th April, 2022 followed by Bahamas and Mainland China with 92 and 87 per cent respectively.

In terms of the top 10 CBDC, the Nigeria’s eNaira emerged 1st in global ranking of retail index with index value of 95 percent as well as first in African Region. Also, key eNaira statistics available as at December, 2021, showed that 666,000 number of eNaira Speed Wallets were created, 700,000 number of eNaira Speed Wallet App downloads were done from 160 countries and over 35,000 transactions actualized. Out the transactions, 90 per cent of them constituted person -to -business and business -to- person. The current statistics as at June, 2022 is expected to be higher and more impressive given that the previous data were generated just three months after the launch of the eNaira in October, 2021.

It is noteworthy that global authorities, including the International Monetary Fund (IMF), are apprehensive of possible risks associated with digital products. Thus, the authorities have continued to provide reminders that countries adopting CBDCs must remain vigilant to various risks, including monetary policy implementation, bank funding, cyber security, operational resilience and financial integrity and stability through regular risk assessment and contingency planning. Consequently, the CBN is unrelenting in keeping watchful eyes on the eNaira with innovative upgrades.

Clement Nwoji, Abuja is a journalist and public affairs commentator based in Abuja