What exactly will happen to eNaira?
Months after the announcement of Nigeria’s digital currency, eNaira, they still haven’t told us what exactly it can accomplish that isn’t already possible. From everything they’ve said so far, eNaira appears to be a duplication of existing efforts in the electronic banking industry.
After an initial false start and several technological problems, the Central Bank of Nigeria finally launched the eNaira on Monday at the State House in the Federal Capital Territory. The occasion was the occasion to address the question of the interest of the eNaira but the president, Major General Muhammadu Buhari (retired), did not go beyond the echo of the same old story. He said the digital naira would increase remittances, promote cross-border trade, improve financial inclusion, make monetary policy more efficient and allow the government to send direct payments to citizens eligible for specific social protection programs. . Almost each of these achievements listed by Buhari is at least two decades old, thanks to the advent of internet technology and the globalization of the banking system. In the case of Nigeria – and perhaps most African countries – we also have to thank the influx of relatively cheap Chinese phones for facilitating electronic banking and financial inclusion.
Apart from Buhari’s address, I have also followed several “expert” opinions on eNaira. While some hailed the initiative as a game changer, none of these enthusiasts pointed out what a digital currency does differently from the electronic transactions people make on the internet, banks, cash applications, and machines. point of sale. The fact that we live in a country where a pastor conjured “miracle money” is an indication that liquefied fiduciary instruments have become.
Contrary to some misinformed claims in some quarters, eNaira is not a “cryptocurrency”. It is not going to increase in value like bitcoin or similar forms. ENaira is the same money you currently have in your bank account and already transact through banking apps. There’s probably nothing you wanted to do with eNaira locally and internationally that you probably can’t already do with your ATM card. When it comes to international transactions, eNaira will face the same obstacles that people currently face when paying for certain goods and services from Nigeria.
When questioned in a live television interview, a CBN director said that eNaira was the start of Nigeria’s “march to prosperity”. Unless the CBN has something else that it hasn’t told us yet, digital currency isn’t the revolution it claims to be. It’s a reinvention of the wheel, albeit in a digital format. To claim exaggeratedly that eNaira will lead Nigeria to prosperity is unnecessary and likely to sow the suspicion of an already cynical population about the effectiveness of our institutions. Countries prosper on the basis of the productivity index, not because they have created an additional means of payment to compete with existing organizations. It is even problematic that the CBN presents itself as a competitor to other agencies which already efficiently provide the same services. Before you know it, the CBN will be adopting monopoly policies to oust these financial organizations so their eNaira can thrive.
The fact that the CBN is currently underestimating the potential of digital currency by focusing on how it duplicates existing efforts doesn’t make the initiative a totally unnecessary idea. Countries like China and Sweden that also issue digital currencies – the e-renminbi and e-krona, respectively – discussed how e-money would improve the transparency of global financial transactions. Some other countries currently piloting the digital currency project have also focused on how they plan to use digital currency to reduce money counterfeiting, develop more robust surveillance systems to monitor terrorist financing, combat against corruption by discouraging parallel transactions and combating money laundering.
For Nigeria, one would expect the CBN to show how digital currency can support anti-corruption efforts and its plans to strengthen oversight of regular illicit cash transactions in high places. For example, how will the traceability of eNaira transactions make it harder for politicians who requisition a van of bullion from their private homes during a general election to do whatever they do with so much money? In the wake of the Panama Papers and Pandora Papers revelations on illicit global financial transactions, how can we step up monitoring of international money transfers? Instead, CBN sells the most basic functions of electronic transactions. So far, nothing they claim the eNaira will achieve deviates from the same things that the talkative Sanusi Lamido Sanusi said when, as governor of the CBN, he was promoting the policy of “Cashless society”.
For a country that lacked basic infrastructure, some of the ideas Sanusi introduced to facilitate the cashless policy turned out to be simply punitive. When summoned to the National Assembly to clarify the issues, Sanusi over-promised on how they would conduct cashless transactions and skillfully sidestepped the real issues – the level of infrastructure Nigeria required to move up to a cashless society was hardly available. Today, the legacy of their aspiration to become a “cashless” society is evident in the difficulties of doing business in Nigerian banks. Nigeria is one of those rare places in the world where you see people lining up at an ATM for up to a mile. These machines were designed for / by companies already “cashless”, not to replace traditional banking services but to supplement them. But the way we use it in Nigeria is an abuse, and that’s because our society likes to run before it can even walk. A decade after we embarked on the ‘cashless’ path, the CBN is still trumpeting almost the same things as eNaira’s potential achievements.
Digital currencies aren’t exactly new, although a necessary response to our modern world where technology is radically changing the meaning of ‘national borders’. Some experts predict that cash will eventually disappear with more electronic transactions now possible as a result of the ubiquity of digital technology. The time is coming when the central banks of countries will be considerably weakened because people can effectively do business globally without resorting to their national currencies. Digital currencies are one way to anticipate this possibility. But it is not enough for Nigeria to simply reproduce what already exists and sell it as something new. They should at least go further to identify the gaps in what remains and fill them as well.
Countries like Senegal and Ecuador also launched their digital currencies, but they eventually canceled them. Senegal’s e-CFA failed because it mostly followed the same top-down approach of the conventional banking system and the millions of people who might have participated were then excluded. As for Ecuador, digital currency was massively unpopular because people simply couldn’t trust their central bank to run an efficient digital monetary system. They also trusted the dollar more than their local currency. Meanwhile, Kenya has been running MPesa – its mobile financial transaction system – since 2007, and it is a resounding success. The MPesa has been widely studied in institutions around the world as an example of how modern technology can promote financial inclusion among the unbanked. Compared to Senegal and Ecuador, the lesson is that technological breakthroughs thrive best when an audience relates well to them and also takes organic initiatives that establish them.
Nothing the CBN sells through the eNaira project is new. They do not even sufficiently respond to the realities of an emerging world where government institutions are more easily bypassed by people who can opt for the more efficient services provided by transnational corporations. For example, Facebook, a platform that connects about half of the world’s population, is working on its digital currency, Libra. The breadth of their reach makes Facebook the largest country in the world. When they launch Libra, it will not only be a strong global currency, it will also be self-sustaining. When this happens, what happens to eNaira? The relative ease with which millions of Nigerians circumvented Buhari’s Twitter ban by downloading a VPN has exposed the limits of government control in a world revolutionized by technology. Agencies like the CBN had better start thinking drastically before they get totally irrelevant.
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