In line with efforts to enhance the payment system and boost transactions, President Muhammadu Buhari yesterday launched the Central Bank Digital Currency (CBDC), also known as eNaira, in Abuja. This was as Governor of Central Bank of Nigeria (CBN), Mr. Godwin Emefiele, unveiled a new financial instrument tagged, “The 100 for 100 PPP – Policy on Production and Productivity,” meant to stimulate activities in private sector companies in the country that would be selected.
Buhari said during the launch of the digital currency that with the introduction of eNaira, the country’s Gross Domestic Product (GDP) was projected to rise by $29 billion in the next 10 years. He stressed that Nigeria was the first country in Africa and one of the first in the world to introduce digital currency.
The president stated, “Indeed, some estimates indicate that the adoption of CBDC and its underlying technology, called blockchain, can increase Nigeria’s GDP by US$29 billion over the next 10 years.
“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 president assured Nigerians of the safety and scalability of the CBDC. He disclosed that the journey to create a digital currency for Nigeria began in 2017.
According to him, ”Work intensified over the past several months with several brainstorming exercises, deployment of technical partners and advisers, collaboration with the Ministries of Communication and Digital Economy and its sister agencies like the Nigerian Communications Commission (NCC), integration of banking software across the country and painstaking tests to ensure the robustness, safety and scalability of the CBDC System.”
The president also explained why he supported the initiative, saying in recent times, the use of physical cash in conducting business and making payments has been on the decline.
The decline was exacerbated by the advent of the COVID-19 pandemic and the resurgence of a new digital economy, stressed.
Buhari stated, “Alongside these developments, businesses, households, and other economic agents have sought for new means of making payments in the new circumstances.
“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.
”In response to these developments, an overwhelming majority of central banks across the world have started to consider issuing digital currencies in order to cater for businesses and households seeking faster, safer, easier and cheaper means of payment.
“A handful of countries, including China, Bahamas, and Cambodia, have already issued their own CBDCs. A 2021 survey of central banks around the world by the Bank for International Settlements (BIS) found that almost 90 per cent are actively researching the potential for CBDCs, 60 per cent were experimenting with the technology, and 14 per cent were deploying pilot projects.
“Needless to add, close monitoring and close supervision will be necessary in the early stages of implementation to study the effect of eNaira on the economy as a whole.
”It is on the basis of this that the Central Bank of Nigeria (CBN) sought and received my approval to explore issuing Nigeria’s own Central Bank Digital Currency, named the eNaira.”
The president also said CBN’s reputation as a leading innovator, “in the form of money they produce, and in the payment services they deploy for efficient transactions,” inspired him to approve eNaira.
He noted that Nigeria’s apex bank had invested heavily in creating a payment system that was ranked in the top 10 in the world and, certainly, the best in Africa.
Buhari explained, “This payment system now provides high-value and time-critical payment services to financial institutions, and ultimately serves as the backbone for every electronic payment in Nigeria.
“They have also supported several private-sector initiatives to improve the existing payments landscape, and in turn, have created some of the world’s leading payment service providers today.”
Emefiele said with the new initiative, CBN would advertise, screen, scrutinise and financially support 100 targeted private sector companies in 100 days, beginning from November 1. Under the initiative, the CBN governor said, a new set of 100 companies would be rolled out every 100 days and their names would be published in the national dailies for Nigerians to see and confirm.
He said the new initiative would be managed by the CBN Development Finance Department, under his direct supervision.
The CBN governor pointed out that the initiative would be the best and most sustainable way to strengthen the value of the naira, insisting that what the country requires is production and more production.
Emefiele explained, “Working through banks, the financial instrument will be available to their customers in critical areas to boost the production and productivity, and to immediately transform and jumpstart the productive base of the economy.
“After these 100 projects by companies in the first 100 days from November 1, we will take the next 100 companies/projects for another 100 days beginning February 1, 2022, and then another 100 companies for another 100 days beginning from May 1, 2022.”
He said the instrument was part of measures to reverse the country’s overreliance on imports, adding that the country cannot afford to waste its reserves on cheap imports and currency speculators.
Emefiele also assured that there was no cause for alarm over foreign exchange (FX) availability in the country, pointing out that the country’s FX reserves are strong and, “indeed, getting stronger by the day, crossing the $40 billion mark, and is one of the highest in Africa – and growing.”
On the bank’s latest intervention to support companies, the CBN governor said, “We believe that if we target and support the right companies and projects, we will see a significant, measurable and verifiable increase in local production and productivity, reduction in certain imports, increase in non-oil exports, and improvements in the FX-generating capacity of the economy.”
Emefiele stated that the current challenges with the country’s exchange rate started since the advent of the International Monetary Fund (IMF) led Structural Adjustment Programme (SAP) in 1986, and the introduction of the Second Tier Foreign Exchange (SFEM) market. He said the local currency had been on a one-way free fall from parity to the US Dollar in 1984 to over N410/USD today.
He said about 35 years later, Nigeria had not been able to achieve the many promises and objectives of that programme.
“Instead, what we have seen is widespread import dependency, which have wiped out most of our production and manufacturing bases and exported all our jobs in the process,” he said.
Emefiele queried, “What has happened to the massive textile factories across our nation, such that we import almost all cotton products when we are rich in cotton?
“What has happened to our vehicle assembly plants across the nation such that we import most vehicles and have become a massive dumping ground for dying second-hand vehicles?
“What has happened to our rubber plantations through which we made the best tyres and rubber products in the world? What has happened to our groundnut pyramids? What has happened to our cocoa farms? What has happened to our palm oil mills?”
He said, “We must return to massive home-made production; we must get our people working again. We must create the economic environment for massive domestic production and significant non-oil exports.”
The CBN governor said the country must return to an employment-led growth anchored on productivity and rewarding producers of local goods, services, innovation and new technologies.
“If you consume cheap imports and export our jobs, we will make you pay dearly; but if you produce locally – with little or no foreign inputs beyond machinery – we will support you, and the markets will reward you abundantly.”
He said the 100 PPP policy was in addition to other policies and interventions of the CBN meant to support the economy, especially, through the trying times of COVID-19.
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. He said 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.
CBN decided to implement its own CBDC and to name the digital currency eNaira, with the expectation that the innovation would make significant positive difference to Nigeria and Nigerians, he stated.
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.”
Emefiele said in a bid to further de-risk the process, CBN had given careful consideration to the entire payment and financial architecture and designed the eNaira to complement and strengthen these ecosystems. He said the bank had also implemented safeguards and policies to maintain the integrity of the financial system.
The CBN boss added that there would be strict adherence to the anti-money laundering and combating the financing of terrorism (AML/CFT) standards in order to preserve the integrity and stability of Nigeria’s payment system.
He said since the eNaira platform went live, there had been overwhelming interest and encouraging response from Nigerians and others across the world, with over 2.5 million daily visits to the website.
According to him, 33 banks are fully integrated and live on the platform while N500 million had been successfully minted by the central bank, including N200 million, which had been issued to financial institutions.
Emefiele said over 2,000 customers have been on-boarded while120 merchants had successfully registered on the eNaira platform.
He said, “Today, customers who download the eNaira Speed Wallet App will be able to perform the following: Onboard and create their wallet, fund their eNaira wallet from their bank account, transfer eNaira from their wallet to another wallet, and make payment for purchases at registered merchant locations.”
Emefiele acknowledged there was a continuing debate on the true value of the naira, adding, “rather than worry today on the direction of the exchange rate, let us take a step back and analyse how we got here, in the first place.”
He commended the CBN staff that worked tirelessly to deliver on the central bank’s numerous projects.
Speaking further in an interview with THISDAY, Emefiele said, “We would not embark on a project where we have not really dimensioned the risks; you identify risks and you now measure the risks and then we think about how to manage the risks and we have looked at it.
“There is no need, absolutely no reason for anybody to be afraid of the risk of even hacking your account and the rest of that.”
He added, “This morning I set up my account and my account is operating very well. I talked about the BVN; the BVN is one of the best payment systems infrastructure that we have put in place and I can assure you that with all that has been done, you cannot hack into it.
“If somebody hacks into yours, it will be because you were reckless in handling your information but not that the system failed.”
He described eNaira as an extension of the payment system in Nigeria, which would enhance payments outside the country.
He said, “You can make payment for goods and services rendered to somebody who even resides outside the country as long as he is willing to accept Naira.
“We will see eventually that what it does is that your reliance on third currency would be reduced by embracing eNaira. That is one area that I am looking forward to, how this would help our country.”
CBN Waives Charges on eNaira Transactions for 90 Days
CBN yesterday said charges for transactions that originate from its eNaira platform would be free from charges for the first 90 days, commencing October 25. The bank noted that it would, thereafter, revert to applicable charges as outlined in the Guide to Charges by Banks, Other Financial and Non-bank Financial Institutions.
This was revealed in a circular on the Regulatory Guidelines on the eNaira, dated October 25, 2021, which was signed by the apex bank’s Director, Financial Policy and Regulations Department, Chibuzo Efobi, and addressed to all stakeholders.
CBN restated in the circular that the digital currency would complement cash as a less costly, more efficient, generally accepted, safe and trusted means of payment and store of value.
It added that the eNaira would also improve monetary policy effectiveness, enhance government’s capacity to deoy targeted social interventions, provide alternative less costly channels for collection of government revenue and boost remittances through formal channels.
According to the apex bank, the guidelines further seek to provide simplicity in the operation of the eNaira, encourage general acceptability and use, promote low cost of transactions, drive financial inclusion, while minimising inherent risks of disintermediation or any negative impact of the system.
The eNaira wallet is required to access, use and hold eNaira, which will be exchangeable for other Central Bank Digital Currencies (CBDC).
The CBN added that the AML/CFT checks for fraud prevention and detection would apply on the eNaira platform.
Hence, financial institutions are required to comply with the Money Laundering (Prohibition) Act 2011 (as amended), the Terrorism (Prevention) Act 2011 (as amended) and all subsisting anti-money laundering laws and regulations as may be issued by the CBN from time to time.
Under the new system, Ministries, Departments and Agencies (MDAs) may receive revenue in eNaira; and make payments in same form.
It added that users of the eNaira would be introduced to a tiered structure with transaction and balance limits.