The eNaira: The 1 Good, 2Bads & the Rest of Us

e-naira vs crypto

The launch of a digital currency, the eNaira by the CBN, in October to coincide with the nation’s independence anniversary has been seen to have huge and enormous advantage for young Nigerians.

Experts in the country is of the opinion that the use of the eNaira is safer than cryptocurrency. The main difference between eNaira and crypto is that, while the former is regulated by a government, the later is not (and that is the reason why authorities restrict and warn against bitcoin, ethereum and the likes).

In 2017, the CBN took the decision to digitize the Naira, following the rise in the use of digital payments and acceptance of the digital economy. In late August 2021, the regulator announced the selection of Fintech company, Bitt Inc., as the Technical Partner (ref).

The eNaira would only exist in digital and electronic form, and local and international transfers can be made within a little time and at cheaper rates. It simplifies cross-border trade and guarantees a faster inflow of remittances.

Nigerians would be able to transfer existing funds in bank accounts to their digital currency account, helping to create new business opportunities, financial products and services, reduce the cost of operations, an streamline management of cash.

Mixed feelings about the eNaira

Since the release of the guideline in Nigeria, many concerned voices have expressed their fear that this is not different from what they are currently used to and in that case not necessary. The beauty however is in the charges for those who are cost-sensitive.

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All charges are zero! Let me repeat that. All transactions done on this platform are at no cost to the customer. So some people may find it smart to move a large single sum from their commercial bank account to spend from their wallet thereby avoiding all the charges that come with spending from commercial banks.

While this seems to be a great idea benefitting the majority of the citizens, analysts have queried the fate of commercial banks claiming that the movement of funds to wallet may create a run on the banks while the loss of income will erode their bottom line. They feel it is not sustainable and will eventually be reviewed.

On the Long Run

eNaira serves as both a medium of exchange and a store of value, offering better payment prospects in retail transactions when compared to cash payments. So, on the long run, we hope that the eNaira will be able to achieve its objectives which are:

  • Growth- eNaira fosters Economic Growth by offering easier access to capital and financial services thereby increasing economic activities – especially e-commerce at low/no interest transaction rate.
  • Remittance- provides a secure and cheaper diaspora Remittance option and an increase in the speed of such transactions.
  • Monitoring-eNaira’s traceability limits its use for illicit or fraudulent purposes.
  • Inclusion- eNaira provides Financial Inclusion by making financial services available to people or communities who do not have (enough) banking opportunity.
  • Trade- increases Local and International Trade by making transactions cheap, safe, quick, and better.
  • Security- eNaira has a stronger security because it cannot be forged or counterfeited as a result of its unique identity and security structure.
  • Revenue- aids Revenue collection by reducing cash handling costs.
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The eNaira vs Crptocurrency

eNaira and crypto

Just like cryptocurrencies, the eNaira digital cureency by design allows the central banks to know who is holding what money. For example, imagine that CBN issues a 1000 naira note with serial number 347589. In today’s world, once that money is printed, the CBN doesn’t ever know who it is with.

However, with a digital currency, the CBN exactly knows who is with the money and what they are doing with it. With digital currency, the privacy that spending in cash gives you will not exist. Imagine the government leveraging the eNaira to survey human rights organizations and what they are doing with the money they get as donations.

The CBN will now need to create sufficient awareness of its digital currency project and its benefits given the perception of most Nigerians who have come to associate crypto-currency use to online scams.

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