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How far can CBN sustain e-naira?

By Adefolarin A. Olamilekan   The Central Bank Digital Currency (CBDC) codenamed e-naira comes on stream on October 1, 2021. The apex bank has been…

By Adefolarin A. Olamilekan


The Central Bank Digital Currency (CBDC) codenamed e-naira comes on stream on October 1, 2021. The apex bank has been conducting research on regard to digital currencies since 2017 to understand how the Hyperledger Fabric Blockchain technology is being used globally.

At a recent stakeholders meeting organised by its Information Technology (IT) department, CBN explained that Hyperledger Fabric is an open source project that acts as a foundation for developing blockchain-based products, solutions and applications using plug-and-play components that are aimed for use within private enterprises.

The Nigerian monetary authority added that the importance of its digital currency would include macro management and growth, cross border trade facilitation, financial inclusion, monetary policy effectiveness, improved payment efficiency, revenue tax collection, remittance improvement and targeted social intervention.

Some countries across the globe such as China (digital Yuan), Bahamas (sand dollar), and Eastern Caribbean (DCash) are among the few countries that have officially launched their national digital currencies. In the meantime, In Africa, South Africa (digital Rand), Tunisia (eDinar) and Ghana (e-cedi) are also joining the foray.

Earlier this year, CBN banned cryptocurrency transactions in the country, warning that it poses the risk of loss of investments, money laundering, terrorism financing, illicit fund flows and other criminal activities.

The ban was followed with a huge outcry from sundry financial experts and concerned citizens. The bank, however, came up with a blueprint of going into digital currency.

According to the CBN the e-naira will be a legal tender for the entire country as a non-interest-bearing CBDC status issued by a sovereign authority. It has transaction limit for customers and a value-based transaction. It will not grow in value like Bitcoin or other cryptocurrencies, but will function the same way the naira does. The e-naira will be pegged to the naira so that their value remains the same like stable coins pegged to the dollar. There is an e-wallet of the apex bank called “Speed wallet”, to be issued to all users and customers.

To use the e-naira to transact, users will have to download the speed wallet, validate their account on the wallet by using either their phone numbers, National Identity Number (NIN) or Bank Verification Number (BVN). Once done, users can begin to use the wallet. Users will be able to send money using Peer-to-Peer (P2P) transactions through their wallets to other wallet holders, Person-to-Marchant/Business where e-naira users can pay for items to merchants who have the e-naira wallet and vice versa.

According to the CBN, the e-naira will aid financial inclusion and propel a cashless policy. There is also the possibility of Ministries, Departments and Agencies (MDAs) transactions with e-naira; to do remittances to their staff and members of the public.

The e-naira will be created independent of bank accounts; the wallet will be created by financial institutions that will create customer identification through an application product interface.

However, the “Speed wallet” will not compete with existing bank customers’ wallet. What is more is that e-naira as a strategic national interest would be a critical security infrastructure that will be subjected to comprehensive security check; all data and personally identifiable information (PII) will be kept off the ledger.

Technology enables non-counterfeitable CBDC as a digital bearer instrument which meets the scale, interoperability, instant settlement and other operational and policy requirements for use as legal tender.

The point here is that with all the exciting developments about the CBN’s e-naira, our case is for forethought and heed. One needs to remember its cashless policy which success is still being assessed. Although, there are experts who believe the implementation of the e-Naira would be better than its cashless policy.

Ironically, CBN’s mandate to drive for financial inclusion through the e-naira may have to contend with deficit internet infrastructure challenges. There are concerns also that a Nigerian CBDC will be too costly to implement when compared to other systems that exist.

Apparently, the apex bank has its duty cut out. Importantly, whenever we celebrate CBN’s innovation as a monetary authority, we must recognise the need for policy sustenance against the process of accumulation of external reserves. We must show greater interest in the apex bank avoiding unfortunate, distortion, naira depreciation and destabilising interest rates.

As a result it must take measures to contain inflation. As it has been put forward elsewhere that the apex bank is “better off spending its time and resources on pressing issues like how to combat double-digit inflation”. This would help not to crowd out the real sector from access to cheaper loanable funds that are necessary to drive lower inflation rates and boost economic growth with increasing job opportunities.

The question, therefore, is: “How far can CBN sustain e-naira? As foremost Nigerian economist and monetary policy analyst, Late Henry Boyo, would say, “Nigerians do not interrogate the process through which CBN consolidates its policies”.


Olamilekan wrote from Abuja

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