BY ONOME AMUGE
The application of digital payment and digital currencies in conducting contactless business transactions has in recent times facilitated a paradigm shift from cash to electronic payment options with an increasing impact on consumer behaviour.
A report by leading provider of market and consumer data, Statista, showed that the total transaction value in the global digital payments sector was worth $5.2 trillion in 2020. The report further projected a more positive outlook for global digital payment which is expected to hit $13.9 trillion by 2026 at a compound annual growth rate (CAGR) of 13.10 percent.
The Central Bank of Nigeria, spurred by the notable advancements in digitised financial transactions and aiming to improve Nigeria’s financial inclusion, launched Africa’s first central bank digital currency (CBDC) named eNaira in October 2021.
The development saw Nigeria create its own form of digital currency expected to speed business transactions, increase cross-border trade, accelerate financial inclusion while minimising inherent risks of disintermediation of any negative impact of the financial system, as noted by the CBN.
According to the CBN, the eNaira was created through a partnership with Bitt Inc., a Barbados-based digital currency technology company, to facilitate and develop the technical applications of the country’s digital currencies using blockchain technology.
Rakiya Mohammed, director, information technology department, CBN, explained that the eNaira was established using the distributor ledger technology which employs the use of cryptography to ensure secure digital transactions and prevent counterfeiting.
Mohammed further noted that it is a digital representation of the physical naira, created to expand the channels of payments for transactions in Nigeria and also, provide an alternative, more secure, traceable and defined process for payments and transactions.
Highlighting the prospects of the digital currency in Nigeria, she expressed confidence that the e-naira would catalyse Nigeria’s digital economy through the integration of people outside the formal banking sector, boost cross border trade, enable better macroeconomic policy formulation, encourage cheaper and faster remittance inflows, improve the country’s payment system and also, reduce the cost and time of transactions.
How the e-Naira functions
Gaining access to the e-Naira platform requires creating and registering an e-Naira wallet via the e-Naira app which can be downloaded on smartphones from either the Google Play Store or Apple Store, while feature phone users can register using the USSD codes and following the registration prompts.
After registration, users will be able to transfer money from their bank accounts or credit cards to their e-wallets. They can also send and receive payments to/from other users of the digital currency. The e-Naira comes in two versions; one for individuals (speed wallet) and the other for merchants (merchant wallet)
On how individuals and businesses can access the e-Naira, Chibuzor Efobi, director of financial policy and regulations department at the apex bank, explained that the CBN issues the eNaira to financial institutions for onward supply to the public, members of the public are then granted access using a three-tiered method which includes the user’s Bank Verification Number (BVN) to prevent fraudsters from hacking into the system.
Efobi also noted that to ensure strict compliance of KYC (Know Your Customers) protocols, customers with daily transaction value below N50,000 a day require a National Identification Number (NIN) verified phone number to purchase eNaira, while those with transaction values above N50,000 to the daily limit of N1 million, require a BVN in addition to a NIN verified phone number to access e-Naira. This, he explained, is aimed at ensuring the safety and utility of the eNaira.
The journey so far
Since its launch almost seven months ago, the eNaira appears to have recorded some interesting results, with a steady influx of downloads, going by a recent report.
PriceWaterhouseCoopers (PwC), the advisory and consultancy firm, in its 2022 CBDC Global Index and Stablecoin overview, ranked the eNaira as the number one global retail CBDC in the world, recording 756,000 app downloads in six months.
The report further showed that the app was also downloaded across about 160 countries spanning South America, Europe, Asia, and in almost all the countries in Africa.
Confirming the figure in a virtual press conference, Mariam Olusanya, managing director of Guaranty Trust Bank (GTB), added that the eNaira app grew by 56,000 at a rate of 7,300 daily downloads within the first quarter of 2022. In terms of wallet downloads, she remarked that the eNaira has seen 165,000 consumer wallets and 2,800 merchant wallet downloads.
Despite the remarkable number of downloads, the e-Naira’s modest transaction level has raised concerns that actual usage by individuals across the country is in sharp contrast to active downloads.
Analysts opine that a large number of downloads are dormant, adding that acceptance among Nigerians is low as many do not have a clear understanding of how it functions, a situation worsened by fears of more exposure to internet banking frauds, stolen passwords and hacked accounts.
They argued that due to a lack of efficient awareness and limited knowledge of digital currency operations, many Nigerians do not know the difference between the digital representation of cash deposits in bank accounts and the eNaira in digital wallets, making eNaira an unattractive exploit.
The country’s erratic power supply and poor internet access, especially in rural communities, were also considered hindrances to the success of the eNaira.
Observations by Business A.M. found that many Nigerians shunned the eNaira because it is pegged to the value of the fiat currency and as a result, does not accrue any interest to the user unlike the money held in conventional bank savings accounts.
Recounting her experience after registering the eNaira on her device,Victoria Mbachu, a Library/Information Science student at the University of Benin, said it was unnecessary as it did not offer anything better than the regular payment services she was used to.
Patricia Umoh, a shopkeeper at the Ikeja City Mall in Lagos, was oblivious of how the digital currency functions. “I have no idea what it is about. My customers pay me using cash, bank transfer or POS transactions and I think that is enough for my business. Adding the eNaira to the list of transaction options will end up making things more risky and complicated,” she said.
Another respondent who spoke under the condition of anonymity, described the eNaira as “dead on arrival.” According to him, it was introduced into the system to embezzle funds and not to meet the transaction needs of the general populace.
He also expressed concerns that the eNaira could pose a threat to the survival of payment gateway companies like Paga, Opay and other companies that offer point of sale (POS) services.
On the way forward, he called on the government to enhance the implementation of the e-Naira by integrating it with more payment platforms.
“Without this systematic integration, the e-Naira might end up becoming a useless venture,” he added.
Mark Abani, coordinating dean, taxation faculties, Chartered Institute of Taxation of Nigeria (CITN), who dismissed negative criticisms of the eNaira, said the introduction and adoption of eNaira into the Nigerian economy will add $29 billion to the gross domestic product (GDP) of the nation over the next decade.
Abani asserted that the use of the eNaira would enhance cross-border trade facilitation, financial inclusion, monetary policy effectiveness, improve payment efficiency, and revenue tax collection.
The CITN president also raised optimism that the adoption of the eNaira would deepen financial inclusion and commerce in the country and ultimately minimise tax evasion as it seeks to ensure the traceability of tax assets and enforce transparency in the taxation system, thereby increasing government revenue.
He further averred that the functionality of the eNaira will encompass providing consumers and end-users with quick, safe, and simple trading and transactional opportunities.
Assuring traders of the safety and relevance of the digital currency, Bariboloka Koyor, eNaira brand controller, CBN, said the use of the e-wallet would eradicate the spread of counterfeit notes.
Koyor explained that the process was designed with the best integrated security system to guard against fraudulent alerts or transactions.
“The e-Naira is fast and cheap for diaspora transfer and local transfer; for business men and women this is the best in terms of eradicating the spread of counterfeit notes. With this digitalised mode of payment, the risk associated with carrying large amounts of cash around is cancelled,” he assured.
Uche Uwaleke, chairman, Chartered Institute of Bankers of Nigeria (CIBN), Abuja Branch, opined that adoption of e-naira will reduce cost of currency management by the CBN, including the huge cost incurred in destruction of old and worn-out notes.
Uwaleke, who is also a professor of capital markets at Nasarawa State University, added that the eNaira will enhance financial inclusion in the long run, reducing operational costs of handling physical cash and also boost the efficiency of the country’s payment system
On his part, Ado Dansudu, president of the Arewa United Consultative Forum, a non-governmental organisation, considered language as one of the major barriers hindering awareness of the initiative.
Dansudu urged the government to promote awareness and adoption of the e-Naira by translating the messages into indigenous languages to encourage more participation.