Rakiya Muhammad is the Director of Information and Technology at the Central Bank of Nigeria (CBN) and the coordinator of the eNaira project. In this interview with Daily Trust, she talks about the reason the CBN launched the eNaira and how it will drive the government’s cashless policy. Excerpts:
What informed the decision of the CBN to create the eNaira?
Our payment and banking landscape is one of the most mature in the world. In fact, we are way ahead of the so-called developed world in terms of the sophistication and innovations we have seen in the fintech space.
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We were one of the first to introduce USSD because we had to look at our own peculiar challenges and innovate products around that. Our payment is one of the best in the world; there is a statistics out there that shows we have some of the most forward-looking products available in the system.
We have a very vibrant population that is eager to learn, well-equipped, and very serious. Then we have a regulator who embraces innovation. I will say everybody plays a role in this situation given the right environment where innovations can thrive, having the people who are ready to play, and having the organisations who are ready to adapt.
With every innovation, there are three parties: the party whose concern is to bring the product to the market, there are the users who are eager to use the product and sitting between them is the regulator. Our role as CBN is to make sure we protect and allow this innovation while protecting the interest of the consumer.
Young people had thought the eNaira will mirror Crypto currencies and are disappointed that it is not any different from the mobile apps of commercial bank’s?
eNaira allows you to do transactions peer to peer just like with crypto and cash. eNaira is a legal tender, that means it is backed by law and it is exchanged one to one with the naira, so everything you can do with cash, you can do the same with Naira.
We are offering you the same experience that you will have with crypto, you don’t have to be there to conduct a transaction. You can access the eNaira on the phone. With the introduction of the USSD you can dial *997# and conduct your transaction. So, we are bringing in the people who hitherto could only use cash by being physically present where the transaction is happening to an online version, a digital economy space where you are confident the value of that eNaira is still the same as cash.
With crypto however, Consumers have been hurt, people have died, people have lost their money and people have seen a platform where they could launder money, sponsor terrorism and several other bad things. The reason is that transactions that take place between people are encrypted, people don’t see them, so it is very difficult for the regulator to be able to regulate this kind of environment.
Look at the volatility in the pricing of cryptocurrencies a few months ago. From over N20m per Bitcoin to less than N10m, so, if you had invested in three Bitcoins you would have lost over N30m.
In the financial system, we took a deliberate step to be able to hedge against such risks. So, if a bank goes down, we have the NDIC that has insured your deposit. But this one, you don’t have an idea of how much people are investing; you don’t see the transactions that are happening, you are not able to separate the bad guys from the good guys. So it is something that will need the collaboration of central banks all over the world because it is not just within Nigeria. You can transact with somebody in Antarctica without anybody knowing. His own central bank doesn’t know, the central bank here doesn’t know. So, how do you protect that interest?
Are there possibilities that the eNaira can be used for transactions beyond the shores of this country?
What CBN is doing is that we are providing a platform. If you follow the hackathon we held, we had some brilliant ideas, over 4000 entries, from Nigerian youth, who taught that they could build a product on top of that. Some of the products we have seen are to give people the opportunity to do staking, which is similar to them earning some income on their eNaira.
On the question about cross-border and remittance, in our design paper we posted one year ago, the governor said the eNaira is a journey, the next phase is to allow people to be able to transact. So, most nations are careful when it comes to transacting with currencies that are not yours. You don’t want to have a situation where you have currency substitution. We have the bank for international settlement working with a number of central banks to make and facilitate cross-border transactions across different digital currencies and when that happens, people can transact with eNaira and be able to buy things.
What will you say about the concern of migrating funds from Commercial banks to the CBN since the eNaira is domicile with the apex bank?
One of the risks we looked at when we were conceiving the design of the product is financial disintermediation. We don’t want that to happen. If there are no deposits in the commercial banks, they won’t have money to lend out and if they don’t lend out money, it means there will be no activities in the industry and all kinds of negative impact on the economy.
We recognise that, so we limited the amount of money people can hold in their different wallets. We have four categories of different wallets. We have tier three customers with a bank, as each wallet is attached to a bank, and you can hold a maximum of N5m on a daily basis and your transaction can’t be more than N1m a day. We expect that people will move back their money to their bank account once they exceed that threshold to be able to continue that transaction.
This is the same thing with other wallets and the lowest wallet has a maximum transaction limit of N20,000 and a maximum balance of N50,000 a day. If you look at that, it is not really impacting the money in circulation, so we are taking the money out of circulation for people to transact. We are looking at micropayments, so, we are not doing eNaira for big men to buy a N10m mansion as they can’t pay with eNaira in that kind of transaction.
CBN created the financial sandbox where bright minds can test the innovations they are working on, what is the update ?
It is a platform that allows you to showcase your ideas and we as a regulator are able to evaluate the product and offer advice to make sure once the product goes to the market, consumer protection is already built in it. It is quite a journey and I believe in the coming weeks, we should be making a pronouncement on the sandbox, to open it to the public, where people will be able to submit their entries and have the opportunity to showcase their product, then we will be able to see how we can continue to innovate around that.
What made you choose information technology, did you know the world was going to rely on IT this much?
I didn’t know the world was going to change but I recall my father had wanted me to read medicine. But I couldn’t stand the sight of blood and during biology practical I used to run away from the class but I love maths.
When Jamb came and we looked through with my mentor in secondary school, the best place was to go for Computer Science because it was maths heavy. In fact, in school we used to run the same courses up to part three before choosing your speciality. That’s what informed my choice of going into computer science and as God would have it, the whole world has gone IT. That is how I find myself here.
How has been the journey to your rise to head the IT department of CBN?
I started my career a long-time ago, and I went through several companies before I got appointed to the Director of Information Technology in CBN, having worked in various environments which have been quite rewarding because I got the opportunity to learn different cultures from different organisations.
I also got the opportunity to learn about different areas like the core job. I learn how to manage different kinds of people. Incidentally, most of my bosses were men. Throughout my career I have only had one female boss. I must say thank you to the men for mentoring me to be where I am today. Having learned from different people has been quite interesting to be able to look at people from different perspectives but what has been a little bit challenging is adapting to new cultures when you move to a new organisation. The transversal through different organisations has helped me to be able to be able to handle different situations at different places and different times.
