Nigeria’s Head of State, President Muhammadu Buhari, set a continental precedent on October 25 when he officially launched the eNaira, Africa‘s first digital currency.
Legality of the eNaira
The eNaira which is backed by Nigeria’s Central Bank Digital Currency (CBDC), is set to provide transaction expediency, especially in the Small to Medium Enterprises (SMEs) sector, through its seamless digital apps, eNaira speed wallet and eNaira merchant wallet.
How viable is the digital currency?
The move is seen to be embracing the Fourth Industrial Revolution (4IR) that builds on the advances made during the Third Revolution (electronics and IT), but there are already those who question its viability.
I decided to investigate the claim. I spoke with Tope Fasua, an economist, author, blogger, entrepreneur, and recent presidential candidate of the Abundant Nigeria Renewal Party (ANRP) about the eNaira’s pros and cons.
Fasua: ‘The Naira as is, is already quite digital — isn’t it? Nigeria does have one of the most sophisticated financial systems in the world, especially in terms of payment systems. This is … because of our low per capita income and the informal structure of the economy. Many Nigerians have to make millions of small transfers daily, especially to dependants. In developed countries, this is not the case.
‘A typical worker abroad has all the debits for rent or mortgage, insurance, taxes, tenement, loans and so on set up … . Our economy, perhaps like many other African economies, is structurally different from what obtains in those places. Therefore, [we’ve seen] … innovations in our financial sector that may not be deemed particularly necessary elsewhere.
‘Some of us economists criticize the fact that the financial sector in Nigeria is running ahead of everyone else. We call it financialization, as different from what we actually need, which is industrialization. We also see that quirk manifest in the yearly declaration of superlative profits by our banks — even in a year like 2020, when half the time businesses were shut, and in the face of expanding poverty in the land’.
After listening to this I was left pondering whether the eNaira was a good move. Fasua anticipated my thoughts and was quick to negate any festering doubts.
Fasua: ‘I think the eNaira is very useful, timely, and perhaps one of the smartest things that our Central Bank has been able to pull off in a while — even though it will certainly not solve every problem that ails our economy.
‘A number of Central Banks around the world are taking the initiative, and 90 per cent of them are thinking in this direction. Certainly, mistakes will be made, lessons will be learnt, before the concept stabilizes. The future of currency is digital’.
Additionally, Fasua dismissed the notion of the eNaira’s volatility and advised Nigerians to give the digital currency a chance.
Fasua: ‘The eNaira and the fiat Naira will not diverge in value. The two types of currency will be the same value at all times. Also, the fact that the currency is backed by the government through the Central Bank is comfort[ing], because people know that the Central Bank cannot default on its obligations. Investment with the Central Bank of a country is deemed to be the safest kind that anyone could undertake. Companies like Western Union and Moneygram have always taken delight in slamming transactions heading to Nigeria with high fees. Now remittances could be easier and you will get official rates.
‘The black market for foreign currency will still exist, but this kind of reform could be the shock treatment that reduces [its] spread to something negligible. The Central Bank of Nigeria also hopes to use the eNaira for better monetary policy management. For every eNaira created, that is one Naira more in direct control of the Central Bank of Nigeria. There will therefore be better oversight over the money supply. Moreover, if the eNaira is successful, then the world will have a little more respect for our currency, and the Naira may appreciate [in value]. If the Naira appreciates, then inflation will slow down.
‘I urge Nigerians to be less cynical and more circumspect. Let us see if this initiative will deliver. Let us do away with all that negative view of the country. Truly, leaders have failed us, but we need not fail ourselves and enter into a spiral of grief. Nothing is bad about this country. Billions of people around the world would wish they had what we have all year round’.
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