Predictions that the launch of the Central Bank of Nigeria’s (CBN) digital currency, eNaira, would dramatically increase the country’s gross domestic product (GDP) may prove to be correct, as its application is on track for a million downloads over the next few months, writes TONY CHUKWUNYEM
In his speech at the official launch of the Central Bank of Nigeria (CBN) eNaira on October 25, 2021, President Muhammadu Buhari said that digital currency and its underlying blockchain technology have the potential to increase the Nigeria’s gross domestic product (GDP). $ 29 billion over the next 10 years. According to Buhari, the digital currency will help increase remittances, foster cross-border trade, improve financial inclusion, make monetary policy more efficient and allow the government to transfer grants directly to citizens eligible for programs. specific social protection.
As the President said, âAside from the global trend to create digital currencies, we believe there are specific advantages in Nigeria that cut across different sectors and concerns of the economy. The use of central bank digital currencies (CBDCs) can help move many more people and businesses from the informal sector to the formal sector, thereby increasing the country’s tax base. âAlong with digital innovations, CBDCs can drive economic growth through better business activities. Indeed, some estimates indicate that the adoption of the CBDC and its underlying technology called blockchain can increase Nigeria’s GDP by $ 29 billion over the next 10 years. However, before the launch of eNaira, the CBN had issued several statements highlighting the significant positive impact that digital currency would have on the country’s economy. For example, on August 30, 2021, while announcing that it had engaged global finance company Bitt Inc., as a technical partner of eNaira, the apex bank, in a statement by its director of the corporate communications department , Mr. Osita Nwanisobi. , pointed out that digital currency has the potential to solve many of the problems currently associated with cross-border payments and could help improve the accumulation and use of forex. In addition, he said that issuing a CBDC could reduce the demand for foreign currency, as Nigerians could use the CBDC to conduct local and cross-border transactions in the future. Nwanisobi also explained that eNaira was designed to complement rather than replace existing paper money and coins currently in circulation. He highlighted other benefits of eNaira, including a marked improvement in the transmission of monetary policy from the CBN, adding that transactions on eNaira would be less expensive and save time for all users. Yet given that globally only a few Caribbean countries had preceded the CBN in launching a CBDC as well as the fact that many people could not be convinced that CBDCs are different from cryptocurrencies. such as Bitcoin, eNaira skepticism remained widespread in some quarters.
However, within 24 hours of President Buhari’s launch of eNaira, the digital currency, which features two apps – eNaira speed wallet and eNaira speed merchant wallet – the app has been downloaded by over 200,000 users. Although the eNaira speed wallet version of the app was briefly removed from the Google Play Store to allow CBN to upgrade the functionality of the app, it was back online after 24 hours. Indeed, 10 days after the launch of eNaira, a report showed that the eNaira speed wallet, which is intended for individuals, recorded 367,000 downloads, while the eNaira speed wallet for businesses recorded 58,600 downloads. Specifically, the report states that the eNaira speed portfolio for iPhone users grew from 75 countries on October 28 to 81 countries in ten days. For Andriod users, country penetration increased from 148 countries as of October 28 to 163 countries at the end of October. In addition, the merchant wallets for iPhone users experienced country penetration from 51 countries on October 28 to 67 countries as of October 31, 2021. For Andriod users, country penetration increased from 177 countries to 186 as of October 31, 2021. Additionally, on November 16, Bloomberg reported that CBN spokesperson Nwanisobi said the eNaira adoption rate “has been excellent.” He reportedly said more than 488,000 people have downloaded the eNaira Quick Wallet, while around 78,000 merchants from over 160 countries have signed up. Nwanisobi added that around 62 million naira naira have been traded since the digital currency was introduced on October 25, 2021. Likewise, commenting on eNaira’s adoption rate in his speech at the 56th Chartered Institute of Bankers of Nigeria (CIBN) ‘s Annual Bankers At a dinner party late last month, CBN Governor Godwin Emefiele revealed that within four weeks of its launch, the eNaira app recorded nearly 600,000 downloads. He said: âIn less than four weeks since its launch, almost 600,000 downloads of the e-Naira app have taken place. Efforts are underway to encourage faster adoption of the e-Naira by Nigerians who do not have smartphones. âFinancial sector support will be essential in the ongoing deployment of e-Naira and efforts are underway to encourage the continued partnership between CBN and financial sector stakeholders. The governor of the CBN noted that building a robust payments system that would provide cheap, efficient and faster means of making payments for most Nigerians had always been the center of attention. umbrella bank. According to him, “the increasing pace of digitization on a global scale makes the use of digital channels essential to achieve this goal”.
Interestingly, in what industry watchers described as a clear endorsement of the CBN’s decision to deploy eNaira, the International Monetary Fund (IMF), in an explanatory note, which was released on November 16, said that the launch of digital currency was attracting interests from the outside world, including central banks. The Fund attributed the global interest in eNaira to “the size and complexity of the Nigerian economy”. Noting that its Monetary and Capital Markets department “has been involved in the eNaira deployment process, including providing product design reviews,” the IMF said it remains available to help with technical assistance. and policy advice on eNaira, which, according to the Bretton Woods Institution, is the Central Bank’s second digital currency (CBDC), “fully open to the public after the Bahamas.” The IMF is committed to working with the Nigerian authorities on “data analysis, cross-country studies, sharing eNaira experience with other countries and discussing the future evolution of eNaira, including its design, regulatory framework and other aspects “. He pointed out that while eNaira, like digital currencies elsewhere, carries risks for the implementation of monetary policy, cybersecurity, operational resilience and financial integrity and stability, the country’s authorities have taken steps to manage risks. For example, regarding the risk that eNaira portfolios will operate efficiently, as a deposit to the central bank, which may reduce the demand for deposits in commercial banks, the IMF said, âThe transfer of funds from bank deposits to banks. eNaira portfolios are subject to daily transactions and balance limits to mitigate the risks of diminishing role of banks and other financial institutions. He added: âFinancial integrity risks, such as those arising from the potential use of eNaira for money laundering purposes, are mitigated by using a tiered identity verification system and enforcing tighter controls to relatively less verified users. “For example, for now, only people with a bank verification number can open a wallet, but over time coverage will expand to people with registered SIM cards and those with cell phones. but without an identification number. These latter categories of holders would be subject to more stringent transactions and balance limits. âEven so, wallet holders that meet the strictest identity verification standards cannot hold more than five million naira (approximately $ 12,200) each in their eNaira wallets. To deal with cybersecurity risk, regular IT security assessments should be conducted. Analysts point out that since eNaira’s launch on October 25, more countries have expressed interest in issuing a CBDC. It was widely reported last week, for example, that Indonesia’s central bank, Bank Indonesia, announced that it was considering issuing a CBDC to combat the use of cryptocurrency. Bloomberg quoted a deputy central bank governor as saying that âa CBDC would be one of the tools to fight crypto. We guess people would find the CBDC more believable than crypto.
Indeed, given its obvious advantages over cryptocurrencies, especially when it comes to the fact that cryptocurrency traders run the risk of losing all of their money, analysts believe that the adoption rate of eNaira will accelerate in the weeks and months to come, a development which will undoubtedly have a positive impact on the country’s economic growth.