Thursday, November 11, 2021

rom the fanfare about the eNaira, it is doubtful if Nigerians are really aware of what this is about? Even so, it is doubtful to think that eNaira is a Cryptocurrency as put by Mr Godwin Emefiele, the CBN governor? Therefore, it is important to have an overview of cryptocurrency and its implication for the eNaira. A cryptocurrency you could say is a Computer generated non-physical currency meant for online trading and activities. It is meant to operate outside of government centralised financial institution. In otherwords, Cryptocurrencies allow transactions to be verified and recorded by a decentralised system using cryptography (google search). Bitcoin typify a cryptocurrency and provides new means of creating personal wealth which are beyond restriction and confiscation.

Furthermore, underscoring some of the functionalities of eNaira, the governor of CBN listed them as follows: stock wallet, eNaira treasury wallet, merchant speed wallet and speed wallet!

Going by the understanding of what a cryptocurrency is about, the eNaira is neither a cryptocurrency nor the likes of Bitcoin or Ethereum. Even then, it is problematic for the governor, Mr Emefiele and his advisers to unilaterally float any payment system without the necessary primary legislation. Considering that eNaira will fundamentally change Nigeria's financial system and possible fallouts should the eNaira fail, means that primary laws ought to be used in altering any payment system in Nigeria. The governor's quasi law making authority is not enough.

Even the functionalities of eNaira is also problematic, in that CBN is no longer just Banker's bank only but also a commercial bank - a serious conflict of interest that could burden its core duties.

It is a known fact that the problem of the physical Naira is self-inflicted and caused by those who ought to know but failed doing the right thing. Their failing depreciated the Naira that it is worthless and not an acceptable currency at the international market. Yes, exploring the wonder and opportunities of the Internet in reshaping Nigeria's financial and payment systems are welcome development. However, eNaira is likely to suffer the same fate of the physical Naira that ranges from:

  • No unified exchange rate mechanism - official and black market. It is incomprehensible why two exchange rates in Nigeria? Who is deceiving who if official rate for a Dollar is #200 and at the black market for about #450? If, black market rate is the real market value of the Naira then, who pays the difference of #250? The answer is taxpayers and petroleum money! These are monies taken out by unscrupulous government officials and their families to foreign countries. Thereby leaving Nigeria in huge debts that the Naira is weak; the people have no basic social amenities - electricity, drinking water, sewerage system, public transport system, healthcare, failing schools, poverty and crimes, and so on.

    You can imagine how foreign exchange rate disparities are been exploited by ruling elites and their collaborators in fuelling their ostentatious lifestyles and questionable wealth to the detriment of public good. Buhari and his family, including those before them, have used and still using their privileges taking the opportunities offered at the booming black market in undermining Naira and making it a worthless currency. Yet, that won't stop their greed despite the billions siphoned through exchange disparities? It is also responsible for the volatility of the Naira and no urgency to allow the Naira to find its real market value besides the fear of Nigeria's economic collapse. Unless, these problems are cured, the eNaira is getting Nigeria nowhere!

  • Inflation is also a burden on the Naira like everything else! Is a #100 note still worth anything today? How will the eNaira overcome this dilemma?

  • At the moment, there is no difference between physical Naira versus virtual Naira (eNaira) despite the fanfare. The Nigeria factor of always trying to shortcut and never doing things right is going to hurt eNaira- will it pass the Trust test?

    All the same, the argument is not that eNaira is a complete fruitless endeavour considering some of its merits as following:

  • If Nigeria is looking forward to a cashless society, then eNaira gives us the medium of bringing economic restructuring and final ending of the black market on foreign currency trading.

  • Enhancing the efficiency of Nigeria's payment system.

  • Bring about transparency and drastic reduction of public corruption in Nigeria - cashless payment system also mean easy tracing of the source of any financial transaction.

  • eNaira would also have positive impact on fighting money laundering and financing of terrorism.

  • eNaira would bring about reduction of costs including lowering of bank charges.

  • Time saving through electronic payment system and carrying of cash.

  • No more physical Naira also means saving cost of printing physical Naira

  • The list could be longer.

The fact that eNaira doesn't fit the criteria of a Cryptocurrency, There is no point dwelling on it in great details. Nonetheless, Cryptocurrencies as trading commodities at the Stock Exchange are high risky and toxic business. Hence most national central banks are advising their citizens against putting their hard earned monies into Bitcoin and other Cryptocurrencies. The U S ban cryptocurrencies until lifted by Supreme Court in 2020. Even HSBCs note that the eNaira will be direct liability of CBN. Even so, Cryptocurrencies are interesting to countries with unstable and weak national money. It is also true for El Salvador that is also the first country to adopt Bitcoin as national money. Bitcoin is a toxic speculative eMoney, which could be manipulated not just by only forces of the Market. It is doubtful if Nigeria's common-wealth will be able to bear the risks considering there is no insurance against any cyber-sabotage. What did Nigeria ever get right that CBN will get this toxic and complex money matters right?

Although arguing that the eNaira is no Cryptocurrency, the odds against it is such that eNaira should never be contemplated of becoming one! However, the eNaira should be in contemplation of replacing the physical Naira but, on a proper legislative backing in light of its benefits.