This week, Nigeria unveiled Africa's first CBDC (Central Bank Digital Currency), joining over 80 nations around the world to launch a central bank-backed digital currency. This launch was met largely by scorn by many Nigerians, stating that this new currency does nothing to improve the value of the presently ailing fiat Naira and seemed like a ploy by the Nigerian government to gain more ground in their bid to restrict and regulate the transactions of many Nigerians. This led to the app being temporarily taken down from the Google Playstore as a result of its numerous negative reviews.
The e-Naira naira is Nigeria's digital currency based on blockchain technology, It isn't a cryptocurrency but uses the technology for digital currencies built by a foreign company (when local tech startups would have been able to build this required platform) called Bitt Inc. The value of the e-Naira is the same as the conventional fiat Naira. According to the Federal Government of Nigeria, it is aimed at increasing the nominal size of the GDP (gross domestic product) by 30 billion USD in the next 10 years. This growth is meant to be seen as a result of an increase in the efficiency of payments, an increase in the velocity of circulation of money and an increase in activities in the trade sector. This should lead to an increase in the economic gains in Nigeria, yielding an input in the aggregate economy of the nation and also pushing Nigeria more towards a cashless society.
The e-Naira has recently come under scrutiny and has had mixed reviews from the Nigerian populace. On #hivenaija, we are sharing our thoughts on the new CBDC and I thought first pointing out the pros and cons of the currency would be necessary.
Pros
It would relatively ease the transfer of money from one person to another using its mobile app, website and USSD platform. Although all of these are infrastructures that DMBs (Deposit Money Banks) have been using for more than half a decade.
Cost of printing cash would reduce by about 33%.
It could help control inflation as middlemen such as DMBs could be eliminated because transfers on the e-Naira platform are mainly peer-2-peer. Also, divvying of denominations becomes a lot more permissible as compared to cash. Meaning if a commodity is 23.56 Naira instead of being concerned about change with regards to the denomination, smaller fraction payments like 3.56 Naira can be easily made using the e-Naira and avoid the unnecessary rounding off we presently experience.
Cons
The e-Naira feels a bit redundant as all of its features stated are presently available by commercial institutions. As a matter of fact, it seems like a ploy to bully them off the market.
The value of your e-Naira is exposed to the same horrors of devaluation, inflation, excessive importation and as such has no security in the sense that as the Naira continues to plunge in the global market, the new e-Naira would just follow its path.
As everything Nigerian, the e-Naira is heavily regulated and hence might infringe on the rights of its users.
The Central Bank of Nigeria banned cryptocurrencies from circulation declaring them a non-legal tender by financial institutions but went ahead to create a digital currency that operates using that same technology. It just smells like hypocrisy to me.
How does the e-Naira improve the value of the Nigerian economy?
The e-Naira at the present seems to be doing very little to improve the economy in Nigeria. The Federal Government claims it would generate about 30 billion in the next 10 years which would have sounded really nice but considering that increase in a growing economy presently worth 500 billion USD is a drop in the ocean and not worth celebrating. Also, the e-Naira would have been better placed if benchmarked at the price of the dollar, making the value of the e-Naira a bit appreciable but I guess that would give rise to the level of difficulty in understanding its value by everyday Nigerians. In general, we would have to wait and see what future the e-Naira holds, but in my opinion, it's just another grandeur scheme by this present administration to feign progress.
Thanks, #hivenaijaweekly for this amazing opportunity to share my thoughts on the e-Naira.
Sources
Channels TV