e-Naira as Fulcrum for Financial Inclusion

James Emejo writes that the central bank’s aggressive interventions in developing the digital payment infrastructure will fast-track financial inclusion in the country, provide jobs as well as funding opportunities for tech-savvy Nigerian youths, among others

Realising the role of digital technologies in shaping every aspect of human endeavour, particularly the country’s payment landscape, and determined to make Nigeria a financial hub in Africa, as well as become a leading player in the global digital economy, the Governor of the Central Bank of Nigeria (CBN), Mr. Godwin Emefiele, had unveiled a 5-year Policy Thrust of the apex bank, spanning 2019 – 2024.

 According to the CBN governor, one of the targets of the roadmap was to develop a “robust payments system infrastructure that will increase access to finance for all Nigerians thereby raising the financial inclusion rate in the country, and “continue to work with the Deposit Money Banks to improve access to credit for not only smallholder farmers and MSMEs but also consumer credit and mortgage facilities for bank customers”.

Emefiele had also said the central bank’s intervention support would also be extended to the youth population who possess entrepreneurship skills.

The CBN’s agenda is well in line with the administration of President Muhammadu Buhari to among other things develop a “thriving digital economy” to “create employment opportunities for our teeming population and support in lifting millions of Nigerians out of poverty.

Through the National Digital Economy Policy and Strategy (NDEPS), Buhari, believes a digital economy will accelerate the attainment of the country’s key objectives of improving security, reducing corruption, and expanding the economy.

Emefiele who recently expressed optimism that the central bank will meet the 95 per cent of adult financial inclusion target by 2024,  had been spearheading the implementation of various programmes towards achieving these noble objectives set out in the five-year plan.

·       Launch of eNaira

On October 25, 2021, Buhari launched the Central Bank Digital Currency (CBDC), also known as eNaira, adding that it will boost the country’s projected Gross Domestic Product (GDP) by $29 billion in the next 10 years.

The digital currency, which is the brainchild of the apex bank makes Nigeria the first country in Africa and one of the first in the world to introduce digital currency.

Among other things, eNaira seeks to address some of the challenges confronting monetary authority including inflation, by reducing the amount of physical cash in circulation and drastically cutting down the cost of currency production.

·       Limitless possibilities

Right at the unveiling of eNaira, Emefiele had made it clear that the digital currency launch was not a one-off event as there would be more innovations that will emerge from its adoption for the benefit of the economy.

He said described eNaira as timely and strategic in complementing the various diversification and digitisation initiatives of the federal government including the launch of the Nigeria Digital Economy Policy and Strategy (NDEPS), the National Broadband Strategy, as well as the introduction of the Start-Up Bill and a host of others.

Emefiele said the“CBDCs can also help increase remittances, foster cross border trade, improve financial inclusion, make monetary policy more effective, and enable the government to send direct payments to citizens eligible for specific welfare programmes.”

The central bank governor assured Nigerians of the safety and scalability of the CBDC, emphasing on the journey to create a digital currency for Nigeria began in 2017.

Emefiele said with growing interest in CBDC around the world, the CBN had commenced extensive study, consultations, identification of use cases, and the testing of the CBDC concept in a sandbox environment as far back as 2017, stressing that the objective of the research was to establish a compelling case for the adoption of a digital currency in the country to enable a more prosperous and inclusive economy for all Nigerians.

He added that following the completion of the preliminary work, the researchers and experts at the CBN were able to establish that a digital currency will drive a more cashless, inclusive, and digital economy as well as complement the gains of previous policy measures and the fast-growing payment platforms.

He explained that the CBN decided to implement its own CBDC and to name the digital currency eNaira, with the expectation that the innovation would make a significant positive difference to Nigeria and Nigerians. 

Emefiele said the eNaira would support a resilient payment ecosystem, encourage rapid financial inclusion, reduce the cost of processing cash, enable direct and transparent welfare intervention to citizens, and increase revenue and tax collection.

He said eNaira would also facilitate diaspora remittances, reduce the cost of financial transactions, and improve the efficiency of payments.

Emefiele added, “Therefore, the eNaira is Nigeria’s CBDC and it is the digital equivalent of the physical naira. As the tagline simply encapsulates, the eNaira is the same naira with far more possibilities.

“The eNaira – like the physical naira – is a legal tender in Nigeria and a liability of the CBN. The eNaira and naira will have the same value and will always be exchanged at one naira to one eNaira.”

·       Strenghtening the eNaira

In order to realise its objectives for the adoption of the CBDC, the apex bank had in June this year announced registration for the eNaira hackathon, which is a computer programming conference geared towards ideating innovative solutions for the newly launched digital currency.

The event, organised by Africa Fintech Foundry, is an innovative hub established to identify and accelerate innovative startups in Africa in partnership with the central bank.

This was a conscious move by the bank efforts to drive financial inclusion, facilitate macroeconomic growth and integrate the Nigerian economy into the world’s leading economies through innovation and cutting-edge emerging technologies.

The conference themed: “eNaira – Africa’s Gateway to a Digital Economy,” brought together teams of talented entrepreneurs, developers, designers, solution developers, problem-solvers, out-of-the-box thinkers, and code magicians from Africa to develop innovative solutions that would drive improved adoption of the eNaira.

Emefiele, on the innovation in Nigeria’s payments system ecosystem, CBN Governor, Mr. Godwin Emefiele said, “We cannot deny the fact that the newly introduced CBDC (eNaira) would be necessary in the future to ensure Nigeria is competitive as the world becomes increasingly digital.

“We have seen in the past few years how digital currencies have opened international economies to individuals who wield them and how seamless they have made trading, buying, investing and other economic activities.”

He said, “We desire to achieve this and more with the eNaira with the underlying goal to boost Nigeria’s economic outlook. Innovators at the hackathon will develop solutions in the areas of international remittance, trans-border payment, blockchain, financial inclusion, and trade (AfCTFA).”

·     eNaira’s popularity

There’s no doubt, that the introduction of the CBDC has received a warm embrace by stakeholders and Nigerians in general because of the immense opportunities and belief in the product.

A cheerful Emefiele, at the opening of the Grand Finale of the eNaira Hackathon in Abuja,  hinted that eNaira had recorded over 200,000 transaction volumes valued at N4 billion since the platform was launched by Buhari in October 2021.

The CBN governor also said effective this week, Nigerians, both banked and unbanked, will be able to open an eNaira wallet and conduct transactions by simply dialing the Unstructured Supplementary Service Data code (USSD) *997# from their phones.

According to him, since the launch of the great initiative, the eNaira had reached 840,000 downloads, with about 270,000 active wallets comprising over 252,000 consumer wallets and 17,000 merchant wallets.

He said both merchants and consumers with bank accounts can use the NIBSS Instant Payment (NIP) to transfer and receive eNaira to any bank account, adding that this will further deepen the integration of the eNaira with the existing national payment infrastructure.

 * Imminent end to cash transaction

Because of the attachment to paper money, not everybody believes that any other innovation will one day replace the use of money.

However, digitisation of almost everything is forcing a rethink in this aspect.

But according to Emefiele, the world is now in digital dispensation and the use of cash will soon dissipate to zero as digitisation become part of human lives.

This was reechoed by CBN Deputy Governor, Economic Policy Directorate, Dr. Kingsley Obiora, who said the value of e-business transactions had grown from N39.3billion in 2014 to currently about N2.4 trillion.

·       The Hackathon: Showcasing the best of computer programmers

Emefiele, however, pointed out the Hackathon marked another milestone in the journey toward building the future monetary system of the country in response to the emerging trends and developments in the global digital space.

If anything, the event created opportunities for Nigerian youth entrepreneurs who were hitherto starved of opportunities to showcase what they could offer and created an avenue for job creation and innovation.

He said, “Therefore, today’s event is targeted at providing an engagement with critical stakeholders in the financial technology space to deepen the link between eNaira and Fintechs.”

He added that the eNaira hackathon recorded a sizeable interest from young and innovative Nigerians with a total of 4,667 registrations, comprising 4,082 male and 582 female applicants.

“This further corroborates the fact that Nigerians, both within and outside the country, possess innovative ideas and are willing and ready to leverage on exciting opportunities that the eNaira presents for enhancing digital financial services and contributing to national development,” he said.

Emefiele said, “From the presentations made over the course of this eNaira Hackathon, I am confident that it will unravel a pool of talents that would fuel the transformation of Nigeria into a world-class digital economy and beyond.

“From an initial cohort of over 105 groups that made the quarter-finals and 75 teams that progressed to the semi-finals, the hackathon has reached its climax today with 20 teams in the finals from which the top 10 teams would emerge as prize winners.”

·       Boosting macroeconomy

There is no doubt the adoption of eNaira has continued to yield a positive impact even within the shortest time.

In November 2021, the apex bank said it slashed expenditure on currency printing from N75.52 billion in 2019 to N58.61 billion in 2020, representing a decrease of N16.91 billion or 28.84 per cent compared to the preceding year.

According to the annual report by the apex bank’s Currency Operations Department (COD), currency printing gulped N64.04 billion in 2018.

The reduction was in line with the policy objective of the CBN Governor, Mr. Godwin Emefiele  to cut the cost of printing banknotes and cash management, in the country. 

The CBDC has become instrumental in achieving price stability is in line with the policy to further reduce the cost of printing the Naira as well as curb inflation.

·       Strengthening digital economy, e-payment

The CBN’s reforms in the electronic payment system continue to impact the economy positively by facilitating the migration to electronic transactions which will eventually lead to full digitisation.

In April 2021, the National Bureau of Statistics (NBS), reported that a total volume of 3,464,811,083 transactions worth N356.47 trillion was recorded on electronic payment channels in the fourth quarter of 2020 (Q4 2020).

Instructively, online transfers dominated the volume of transactions with over 2.23 billion volume of transactions valued at N120.27 trillion in the review period.

It is apt to add that with the space of digital innovations occasioned by the central bank’s support for tech entrepreneurs, achieving a cashless and more diversified digital economy may just be a couple of blocks away – with implications for security and the economy at large. 

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