On Monday, 25th of October, the eNaira was unveiled by President Muhammadu Buhari, barely months after the Central Bank reinforced its antagonistic stance on cryptocurrencies by ordering banks to shut down accounts transacting in cryptocurrencies.
According to its official website, the eNaira is a Central Bank of Nigeria-issued digital currency that provides a unique form of money denominated in Naira.
The eight reasons why eNaira was created according to the website are: Growth, Remittance, Monitoring, Welfare, Inclusion, Trade, Security and Revenue. While these are all good reasons, it is worth checking if the eNaira can really fulfil these goals.
If the goal here is to increase economic activities at low transaction rates, the goal is achievable, with a transaction charge as follows: N10 for transactions less than N5,000; N25 for transactions between N5,001 and N50,000; and N50 for transactions above N50,000. These are fair rates, but a quick internet search reveals that the same charges apply for electronic transfers between banks. Which begs the question, how are the transfer rates on the eNaira better than that of electronic transfers? If the goal is indeed to facilitate economic activities at low transaction rates, why are the rates not lower?
According to the website, “eNaira provides a secure and cheaper diaspora remittance option and an increase in the speed of such transactions.”
With the high transfer fee of international money transfers, and the high speed of transactions on the app, the eNaira might be able to deliver on this promise. However, in order to even have access to the application, a user has to enter some information for a successful BVN validation check upon which the user is granted access to the platform. Now, in the case of people outside the country who do not have a Bank Verification Number, how do they access the application and use it to send money? This is an aspect that the Central Bank must work on.
This is one major aspect in which the eNaira differs from other cryptocurrencies. While other cryptocurrencies boast about the anonymity of transactions on their platforms, eNaira has decided to go in the opposite direction. Perhaps, this is to put users’ minds at ease who would have been uncomfortable with working with nameless users. On the eNaira application, every user is required to sign up with the following information for a successful BVN validation check: First Name; Last Name; Date of Birth; State of Origin; Email; and Phone Number. Mandating these parameters at signup means that every user on the platform is effectively traceable.
The aim here is to allow effective, equitable and faster distribution of cash assistance to households and communities included in government social welfare programs. However, this might not be easily achievable, with the platform requiring Android 5.0 and upwards for installation. The kinds of families that are usually on government assistance programs are not usually the kind whose members can afford to buy the latest gadgets, or even any kind of smartphone. How then will the people who need government assistance be able to register on the platform and access funds from it?
This is an area where the eNaira falls flat on its face. If the goal is to provide financial services to persons and communities who do not have banking opportunities, how are these people expected to register on the application when registration requires a mobile number connected to their bank account, and a Bank Verification Number?
The eNaira has the potential to increase local and international trade however, for this to occur, users must first have access to the platform which currently, is not the case. As we have discussed above, the platform is not easily accessible both to end-users within the country and end-users outside the country. There are also reports from users on the application’s Play Store page, about difficulty with registration. The Central Bank has to resolve these issues for the eNaira to increase trade.
With the electronic services from Nigerian financial institutions generally being renowned for their safety, this goal is easily obtainable, but it remains to be seen if the eNaira will live up to the security expectations.
This is an objective that is dependent on some of the other goals such as security, trade, inclusion, remittance and growth. If the eNaira can deliver on the above, then it would aid revenue collection but as we have discussed so far, it does not yet deliver on all its promises. Hence, this goal is less likely to be achieved.
In conclusion, the eNaira is a welcomed initiative from the apex bank of Nigeria, but it still has a long way to go before it can accomplish its aspirations of making financial transactions easier and seamless for every strata of the society. In the coming months, as the eNaira gains more popularity with Nigerians, we will be able to assess its performance and conclude on whether it is a better alternative for Nigerians or, if the CBN should have just developed a clear cryptocurrency regulatory framework like other developed countries are doing.