Why The eNaira Should Be Ditched -By Moshood Gbadebo

Just about a week or two ago, the Delta State branch controller of the central bank of Nigeria, Mr Godwin Okafor stated that naira notes will soon be out of circulation and that Nigerians should embrace e-naira. According to him, the e-naira is fully backed by the Central Bank of Nigeria and it is unlike cryptocurrencies such as bitcoin which have no legal backing. Stressing further, he stated that the Central Bank of Nigeria spends money to print money and people abuse the currency in the market by spraying them at occasions which can be termed as a “defacing” of the naira. Be that as it may, this article attempts to educate the general public on what exactly the e naira is about, the pros and cons of a digital currency, the liabilities of such adoption by the Central Bank, the dangers it poses to deposit money banks and the overall effects on the economy. The article concludes with an unfavourable assessment of the digital currency and calls for it to be ditched before it is adopted by the majority of Nigerians.

The E naira is a digital version of the traditional Nigerian currency (naira). What this simply means is that the e-naira is just like a software version of a hard currency. It is tied to the value of the well known Nigerian naira and its value does not appreciate nor does it depreciate independently. Thus, the value of one e-naira is the same as one naira. Thus, despite being a digital currency, it is not subject to volatility like cryptocurrencies. While the idea of not being subject to volatility sounds reassuring to sceptical investors, it at the same time has lesser benefits than the naira notes which Nigerians are accustomed to. Thus, the campaign by the CBN controller that naira notes will soon go out of circulation is a thought that needs to be really revised if the CBN actually intends to go ahead with the plan.

It would be a biased argument if this article merely states the disadvantages of e-naira while leaving out its advantages. Thus, the advantages of the digital currency will be outlined while matching each advantage to its flaws and the risk it poses to the common Nigerian. After all, the whole essence of governmental decisions should be the welfare of the people. The advantages of e naira as stated on e-naira.gov.ng are as follows:

1. It serves as a medium of exchange and a store of value, offering better payment prospects in retail transactions when compared to cash payments: It is conceded that the e naira will serve as a medium of exchange but how the CBN intends to make it offer better payment prospects in retail transactions befuddles the mind. For example, a large percentage of Nigerians are financially illiterate. Thus, unless the e naira is adopted as a payment gateway, this proposed advantage is a wild goose chase. Even if the CBN successfully makes the e naira acceptable as a payment gateway, it will only benefit the economy and not the Nigerian on the street as only cross border trade and the financially literate will most likely adopt it. For instance, you cannot use e naira to purchase your common goods in the market. Thus, rather than threaten the common man to adopt a digital currency that they neither understand nor know how it works, it would be better to embark on a massive sensitisation that yields results (not just any sensitisation). Threatening the general public that hard currency notes will soon go out of circulation seems like putting the cart before the horse.
2. E-naira provides financial inclusion by making financial service available to people or communities who do not have enough banking opportunities: This can be said to be nothing but a fallacy on the part of the Central Bank of Nigeria. As stated above, illiteracy is one of the many factors bedevilling the country. In a country where citizens are yet to fully grapple with the advantages of using the bank provided USSD codes to carry out financial transactions, it remains to be seen how the CBN intends to make the populace get abreast with a service that can currently only be used with an internet service without opening an avenue for fraud and risking unsuspecting individuals to phishing, scams and hack attacks.
3. E naira aids revenue collection by reducing cash handling costs: While this may seem like a real advantage, one needs to be aware of the fact that this is an archaic and irrelevant problem in the Nigerian sector. For instance, in areas of collecting government revenues and levies where the people cannot afford to reach the bank to discharge this civic duty, government officials who travel to these localities stand a risk of losing their jobs.

     With the few advantages of the e-naira stated with the facts that they are unrealistic, the disadvantages of the e naira are outlined below showing why the adoption of the digital currency is not worth the fuss.

1. It Does Not Grow In Value: As already stated above, the e naira is a digital currency pegged against the traditional naira currency. Its value over time remains the same. It lacks the enticing factor that makes cryptocurrency appealing, which is the fact that its value can grow overnight.
2. No Interest: A careful perusal as to why the Central Bank of Nigeria does not provide interest on the e naira may be linked to the potential danger that it portends to deposit money banks. Supposing the e naira is well adopted by Nigerians and interest rate is provided on it, deposit money banks will have less money to generate risk assets, which will in turn lead to raising interest rates on loans, a scenario which the Central Bank will want to avoid if the country is to stand any chance of businesses thriving in the country. This is a careful attempt to keep deposit money banks in businesses.
3. Discourages Savings: The E naira digital currency is one designed for the purpose of spending from it rather than saving. This is in clear contrast to money kept in deposit money banks which people save for rainy days.
4. Risk of Fraud: Reiterating the potential risk that illiteracy poses to the e naira digital currency, it opens an avenue for fraud to be perpetrated on unsuspecting individuals who are not yet financially literate enough to understand the whole concept of a currency run on blockchain technology. Despite the fact that the system offers the advantage of tracing funds, whether the Nigerian authorities are up to the task in a world where black hat hackers can clean traces of tracing remains to be seen.

    In conclusion, despite the publicism and exaggerated advantages attributed to the e naira, it is submitted that the e naira is not an innovation after all and nothing seems to be special about it.