Months after the Nigerian digital currency, the eNaira, was announced, they still have not told us what exactly it can achieve that is not already possible. From everything they have said so far, eNaira seems like a duplication of existing efforts in the electronic banking sector.
After an initial false start and several technological hitches, the Central Bank of Nigeria finally launched the eNaira on Monday at the State House in the Federal Capital Territory. The occasion was a chance to address the question of the point of the eNaira but the President, Maj. Gen. Muhammadu Buhari (retd.), did not go beyond echoing the same old story. He said the digital naira would 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 programs. Almost each of those achievements Buhari listed is at least two decades old, thanks to the advent of internet technology and the globalisation of the banking system. In the case of Nigeria – and perhaps most African countries – we also have the influx of relatively cheap China phones to thank for facilitating electronic banking and financial inclusion.
Apart from Buhari’s address, I have also followed several “expert” opinions on the eNaira. While some praised the initiative as a game-changer, none of these enthusiasts pointed out what a digital currency does differently from the electronic transactions people conduct on the internet, banks, cash apps, and POS machines. The fact that we live in a country where a pastor conjured “miracle money” is an indication of liquified fiduciary instruments have become.
Unlike some misinformed assertions in some quarters, the eNaira is not “cryptocurrency.” It is not going to rise in value like bitcoin or similar forms. The eNaira is the same money you currently have in your bank account and which you already transact through bank apps. There is probably nothing you want to do with the eNaira locally and internationally that you probably cannot do already with your ATM card. When it comes to international transactions, the eNaira will face the same hurdles people currently deal with when paying for certain goods and services from Nigeria.
While interrogated during a live TV interview, a CBN director said the eNaira was the beginning of the “march to prosperity” for Nigeria. Unless the CBN has something else they are not telling us yet, the digital currency is not the revolution they are making it out to be. It is a reinvention of the wheel, albeit in a digital format. Making exaggerated claims that the eNaira will lead Nigeria to prosperity is unnecessary and likely to sow distrust in a populace already cynical about the efficiency of our institutions. Countries prosper based on productivity index, not because they created one more means of making payments to compete with existing organisations. It is even problematic that the CBN presents itself as a competitor against other agencies that already deliver the same services effectively. Before you know it, the CBN will make monopolist policies to squeeze the life out of those finance organisations so their eNaira can thrive.
The fact that the CBN currently undersells the potentials of the digital currency by focusing on how it duplicates existing efforts does not make the initiative an entirely useless idea. Countries like China and Sweden also issuing digital currencies – the e-renminbi and the e-krona respectively – have spoken about how electronic money will improve transparency in global financial transactions. Some other countries currently piloting the digital currency project have also focused on how they plan to use the digital currency to curtail money counterfeiting, develop stronger oversight systems to monitor terrorism funding, fight corruption by discouraging shadow transactions, and confront money laundering.
For Nigeria, one would expect the CBN to show how the digital currency can support anti-corruption efforts, and their plans to heighten surveillance of illicit cash transactions regularly conducted in high places. For instance, how will the traceability of eNaira transactions make it harder for the politicians who commandeer a bullion van to their private houses during general elections to do whatever they do with that much money? In the wake of the Panama Papers and Pandora Papers’ exposés of illicit global financial transactions, how do you intensify supervision of international money transfers? Instead, the CBN is selling the most basic functions of e-transactions. So far, nothing they claim the eNaira will achieve departs from the same things garrulous Sanusi Lamido Sanusi said when, as the CBN governor, he was promoting the “cashless society” policy.
For a country that lacked basic infrastructure, some of the ideas that Sanusi introduced to facilitate cashless policy turned out to be merely punitive. When summoned to the national assembly to clarify issues, Sanusi overpromised on how they would achieve cashless transactions and artfully skirted the real issues – the level of infrastructure Nigeria required to transition to a cashless society was barely available. Today, the legacies of their aspiration toward becoming a “cashless” society are evident in the pains of transacting business in Nigerian banks. Nigeria is one of those few places in the world where you see up to a mile of people queue in front of an ATM. Those machines were designed for/by societies that are already “cashless,” not to replace regular banking services but to complement them. But the way we use it in Nigeria is abuse, and that is because our society likes to run before it can even walk. A decade after we embarked on the path to “cashlessness” the CBN is still trumpeting almost the same things as potential achievements of the eNaira.
What value can eNaira add to poor masses?
Digital currencies are not exactly a novelty, although a necessary response to our modern world where technology is radically changing the meaning of “national borders.” Some experts project that cash will eventually phase out with more electronic transactions now possible, consequence of the ubiquity of digital technology. The time is coming when countries’ central banks will be considerably weakened because people can effectively transact business globally without recourse to their national currency. Digital currencies are one of the means of anticipating that possibility. But it is not enough that Nigeria merely replicates what already exists and sells it as a novelty. They should at least go further to identify the gaps in what subsists and address them too.
Countries like Senegal and Ecuador also launched their digital currencies, but they eventually cancelled 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 could have participated were subsequently excluded. As for Ecuador, the digital currency was massively unpopular because people could not just 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 roaring success. The MPesa has been extensively studied in institutions worldwide 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 better when a public relates well to them and also takes up organic initiatives that establish them.
Nothing the CBN is selling through the eNaira project is new. They are not even responding sufficiently to the realities of an emerging world where government institutions are more easily bypassable by people who can opt for the more efficient services provided by transnational corporations. For instance, Facebook, a platform that connects about half of the world’s population is working on its digital currency, Libra. The scale of their reach makes Facebook the world’s largest country. When they launch Libra, it will not only be a strong global currency, it will also be autonomous. When that happens, what becomes of the eNaira? The relative ease with which millions of Nigerians sidestepped Buhari’s Twitter ban by downloading VPN has revealed the limits of government control in a world revolutionised by technology. Agencies like the CBN had better start thinking radically before they become entirely irrelevant.
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