The Central Bank of Nigeria outlined eight critical objectives that the eNaira should achieve after its pilot launch on October 1st.
From consultations to assessment, to designing the eNaira then the feasibility study, it is about time for the pilot launch of Nigeria’s Central Bank Digital Currency (CBDC) with the sole objective to ‘enable households and businesses to make fast, efficient, and reliable payments, while benefiting from a resilient, innovative, inclusive, and competitive payment system’.
While the Ghanaian e-cedi trial is underway, Nigeria will become the first African country to launch the CBDC — Central banks across the world are exploring ways to create virtual money as legal tender following the growth in digital payments, cryptocurrency and privately issued stable coins.
According to the eNaira official website, the digital currency 'serves as both a medium of exchange and a store of value, offering better payment prospects in retail transactions when compared to cash payments. eNaira has an exclusive operational structure that is both remarkable and nothing like other forms of central bank money'.
CBDCs and cryptocurrency are virtual money: CBDCs are issued and regulated by the nation’s central bank while the other is out of government control.
In a previous interview with Benjamindada.com, a CEO at a local crypto company said that a digital naira will improve transparency in government spending and also provides more liquidity and financial inclusion.
The CEO's submission sits well with the information on the eNaira's website regarding what it intends to achieve.
- Economic Growth
As a middle-income, mixed economy and emerging market, the CBN has said that through easier access to capital and other financial resources, the digital currency will increase economic activities with low interest and transactional rates.
With the digital currency, security and cheaper diaspora remittance will be guaranteed. Users will also be able to remit at a faster speed.
The eNaira will enable the CBN and the nation's security architecture to easily trace funds that are used for illicit purposes thereby by providing a stronger cybersecurity infrastructure.
With the recent surge in the distribution and need for social welfare intervention funds due to various humanitarian crises across the country, the eNaira will enable equity and effective distribution of these funds to various communities that are beneficiaries of these schemes.
- Financial Inclusion
Only 36% of Nigerian adults are financially included. Since the eNaira wallet is available to anyone that has a digital device, the CBN aims to achieve its goal of 95% financial inclusion by 2024.
- Increased Trade
Aside from domestic usage of the currency, it will also enable cross border payments. However, legal and regulatory frameworks and payment systems present a significant obstacle to these kinds of transactions but the apex bank intends to surmount these challenges to enable faster and safer transactions.
- Unique identity and security structure
Even though the CBN claims that the rate of Naira counterfeiting is less than 1%, the unique structure of the digital currency intends to stem the counterfeiting rate to zero
- Aid revenue collection
The digital currency is also an effective revenue collecting strategy, it intends to reduce the cash handling costs and then ensure sufficient cash availability for government's operational costs.
According to a report by Nairametrics on Tuesday, the Central Bank of Nigeria has been sued by ENaira Payment Solutions Limited for 'trademark infringement' over the name — eNaira.
The report further stated that 'a cease and desist notification has been sent to the Central Bank of Nigeria (CBN) concerning the use of the name eNaira'.
As at the time of publishing this report, the CBN had not responded to the controversy.
To ensure that these objectives are achieved, the CBN will need to monitor and analyze the data that will spring out of the use of the eNaira, this will enable evaluation and assessment that will serve as a guide to the improvement of the currency.