Nigeria is betting on its newly introduced digital currency, the eNaira, to grow its economy by as much as $29 billion in 10 years, following its launch on Monday.
The country’s president, Muhammadu Buhari, who performed the launch in Abuja the capital city, said the adoption of the digital currency and its supporting technology (blockchain) has the capacity to grow the country’s GDP by at least $29 billion over the next 10 years.
The launch of the eNaira makes Nigeria the first country in Africa to unveil the digital currency. Though the CBN governor said it was not the same thing as crypto currency.
President Buhari said through a statement by his media aide, Femi Adesina that with the introduction of the eNaira, the government would be able to send direct payments to citizens eligible for specific welfare programmes, as well as foster cross-border trade.
“The CBDCs, together with digital innovations, can foster economic growth through better economic activities, increase remittances, improve financial inclusion and make monetary policy more effective,” he said.
He justified his reasons for approving the e-currency and its ultimate introduction to the Nigerian economy.
“In recent times, the use of physical cash in conducting business and making payments has been on the decline. This trend has been exacerbated by the onset of the COVID-19 pandemic and the resurgence of a new digital economy. The absence of a swift and effective solution to these requirements, as well as fears that central banks’ actions sometimes lead to hyperinflation created the space for non-government entities to establish new forms of private currencies that seemed to have gained popularity and acceptance across the world, including here in Nigeria,” Buhari stated.
He assured of close monitoring and close supervision of the digital currency’s operation in its early stages of implementation to study the effect of eNaira on the economy as a whole.
Nigeria’s currency, the Naira, has been on a downward glide in the last six months to one year in its exchange with major currencies (the Dollar, Pound Sterling, Euro, Japanese Yen, among others).
As at close of business on Monday October 25, the Naira exchanged for N575 at the parallel market.
The bashing of the Naira has affected Nigeria’s external reserve. Though the latter made a rebound to above $40 billion.
Buhari said it was on the basis of assurance of close monitoring that the Central Bank of Nigeria (CBN) sought and received his approval to explore issuing Nigeria’s own Central Bank Digital Currency, named the eNaira.
He noted that countries like China, Bahamas and Cambodia have started issuing their central bank digital currencies, and explained that a survey by Bank for International Settlements had shown that “90 percent of countries are actively researching the potential for central bank digital currencies; 60 percent were experimenting with the technology, and 14 percent were deploying pilot projects.”
“With the launch of the eNaira, Nigeria has become the first country in Africa, and one of the first in the world to introduce a digital currency to her citizens,” Buhari noted. He assured of the safety and scalability of the CBDC system, saying the journey to create a digital currency for Nigeria began in 2017.
Godwin Emefiele, the CBN governor, informed that 33 banks in the country have been on-boarded onto the eNaira platform.
According to Emefiele, the CBN has minted N500 million of the eNaira, out of which N200 million has been released to the banks.
Introducing the eNaira platform, the CBN boss said the eNaira is the digital form of the Naira, issued by it in line with Section 19 of the CBN Act.
“It is a direct liability of the Bank, a legal tender and will form part of the currency-in-circulation and will be at par with the physical Naira (that is 1:1),” the apex bank said.
“The eNaira shall complement traditional Naira as a less costly, more efficient, generally acceptable, safe and trusted means of payment. In addition, it will improve monetary policy effectiveness, enhance the government’s capacity to deploy targeted social interventions and boost remittances through formal channels,” the CBN explained.