Nigeria went a step further last week in deepening its payment system when the Central Bank of Nigeria, CBN launched the country’s digital currency, known as the E-Naira.
The Digital Currency has been in the works for the past four years, with the CBN conducting research, along with other central banks, into the viability of floating a digital currency.
A digital currency according to Investopedia is a currency that is only accessible with computers or mobile phones because they only exist in electronic form.
Typical digital currencies do not require intermediaries and are often the cheapest method for trading currencies.
The E-Naira which was launched last week according to the CBN seeks to achieve multiple purposes among which are financial inclusion, reduced cost of financial transactions and processing of cash and improved payment efficiency.
The CBN Director of Monetary Policy Department, Mahmud Hassan explained further what the E-Naira is about:
‘The E-Naira is the same naira but with many more possibilities, it’s the digitl form of the cash naira. It’s a store of value, it’s a unit of account, it’s a means of exchange or transaction. So it has those qualities but its not an asset that you can trade and so that’s why we keep emphasizing that the CBDC (Central Bank Digital Currency) is not interest-bearing but things can also change in that space’
Nigeria is the first country in Africa to launch the E-Naira and only the seventh globally. According to the Atlantic Council which tracks digital currency developments, 87 countries are now exploring a CBDC, while seventeen Countries including China are at a pilot stage.
The digital currency is also expected to facilitate faster and cheaper transfer of funds as well as remittances from abroad.
However, fraudsters have also attempted to clone the e-naira since its launch, leading to a momentary suspension of the application for Android phone users.
The eNaira speed wallet app was however restored 24hours after it was removed from the Google Play store for technical glitches.
The Governor of the CBN, Mr. Godwin Emefiele also allayed fears as to the security of the E-Naira platform.
“ We will not embark on a project where we have not really dimensioned the risks. You identify a risk, you now measure the risk and you think about how to manage it. We have looked at it,there is no need, absolutely no reason for anybody to be afraid of the risk of hacking into your account. If somebody hacks into your account, it will be because you were reckless in handling your information”
The E-Naira is described as a digital variant of the physical naira.
For now, customers will be able to fund their wallets from their bank accounts, although one will be able to operate an e-naira account in the future even without a bank account.
A Financial Economist, Professor Uche Uwalake explains how the e-naira can facilitate an improved economy.
“ With innovations around it, with the possibility of moving a lot of people in the future from the informal sector to the formal sector, with the possibility of growing the revenue base of the country, for example through improved tax collection, that will also put the Government in a position to spend more. So that is where the GDP growth will come from”
As the roll-out of the E-naira progresses through its initial stages and challenges, it is expected that the anticipated benefits are quickly realized and more people and businesses embrace the innovation.
Reporting by Biodun Dare; Editing by Tina Oyinsan