eNaira to define payment options for businesses, consumers

eNaira to define payment options for businesses, consumers

This year will see speedy rise in the adoption of the Central Bank of Nigeria Digital Currency, eNaira, by consumers and businesses. Like other Central Bank Digital Currencies (CBDCs), the eNaira was created to serve as a medium of exchange and store of value for consumers and businesses. Still issues around deepening foreign capital flows to the economy and exchange rate stability will dominate monetary policy decisions, writes COLLINS NWEZE.

The Central Bank of Nigeria (CBN) has consistently shown commitment to enhancing Nigeria’s -payment system.

The coming of the e-Naira is one of the avenues deployed by the regulator to provide options to digital payment users.

In the year 2022, e-Naira expansion to the grassroots, banked, unbanked and underbanked will dominate banking space. The apex bank had within the past year raised the innovation bar with the launch of the  eNaira.

Like other CBDCs, the eNaira is essentially the digital equivalent of the physical naira stored in an electronic wallet. Similar to paper naira bills, the eNaira is issued and backed by the CBN with full legal tender status and is non-interest yielding.

The CBDCs, in broad terms, are digital innovations that will fundamentally revolutionise the financial sector. The adoption of CBDCs have benefits and implications for monetary authorities, commercial banks and the ultimate end-users.

The development and implementation of safe, reliable and efficient payment systems is one of the crucial roles played by the CBN given that safe, reliable and efficient payment systems help reduce poverty, boost shared prosperity,  expand financial inclusion, foster development and support financial system stability.

The eNaira was unveiled by President Muhammadu Buhari at an event attended by top government functionaries at the State House, Abuja.

Buhari projected that the eNaira and its underlying blockchain technology could increase the nation’s Gross Domestic Product by $29 billion over the next decade.

He said the e-currency would help 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 programmes.

According to him, the eNaira will help move many more people and businesses from the informal into the formal sector, thereby increasing the country’s tax base.

For the CBN Governor, Godwin Emefiele, the eNaira presents great opportunity for Nigeria’s businesses and economy to leapfrog to greater heights.

He announced the theme of the eNaira as: “Same Naira, more possibilities” even as the CBN had appointment of Bitt Inc as technical partner in driving the scheme.

Emefiele listed the benefits of the eNaira to include increased cross-border trade, accelerated financial inclusion, cheaper and faster remittance inflows, easier targeted social interventions, as well as improvements in monetary policy effectiveness, payment systems efficiency, and tax collection.

He said the issue of security was taken very seriously in creating the eNaira system, which will  be treated as a National Critical Infrastructure and subjected to comprehensive security checks.

Bitt Inc is a leader in the Central Bank Digital Currency industry, with subject matter experts at the intersection of technology and policy.

Aside the e-Naira, year 2022 will also present opportunity for the CBN to take measures that would promote foreign capital inflows to the economy.

The National Bureau of Statistics (NBS) data showed that foreign direct investment,  a major catalyst to Nigeria’s development dropped to $77.97 million in the second quarter of 2021, indicating a 49.6 per cent and 47.5 per cent decline compared to $154.76 million and $148.59 million recorded in the previous quarter and second quarter of 2020 respectively.

Also, the fall in crude oil prices has reduced Nigeria’s dollar earnings, making it difficult for the Central Bank of Nigeria (CBN) to fund imports. The scarcity of dollars meant importers now use more naira to buy few available dollars at exorbitant rates, with the costs passed to the consumers.

Also,  the International Capital Market (ICM) is expected to continue providing succour to Nigerian banks in dire need of foreign capital to fund their operations. The government is also looking up to the ICM to raise an additional $2.1 billion after successfully raising $4 billion in September.

Director-General of Debt Management Office, Patience Oniha, had, in the past three months, led international roadshows to encourage investors on the viability of investing in Nigeria. The country is relying on the ICM to raise badly-needed funds to finance its infrastructure.

In September 2021, Nigeria raised $4 billion from the Eurobond market, $1 billion higher than the $3 billion targeted. The three-tranche deal will help finance projects outlined in the Nigerian 2021 Appropriation Act and fund infrastructure.

Oniha said the international investors had shown interest in engaging the government on the new offer but remained optimistic about Nigeria’s credit status.

“We need to assess the market to understand how to proceed. We remain confident international investors find our credit story enticing enough,” she said.

Director-General, Budget Office, Ben Akabueze, said the investors will also be concerned about debt sustainability, but the government had given them assurance on that. He admitted that the major problem was the 73 per cent debt service to revenue ratio which the government is working hard to improve.

Commercial banks are expected to raise additional capital through the Eurobond to enable them to provide medium-term funding and enhance their capacity to support general banking purposes. Ecobank’s $300 million Eurobond offer earlier in the year was oversubscribed by 300 per cent.

Managing Director, Ecobank Nigeria, Patrick Akinwuntan described the Federal Government’s plan for a Eurobond issuance as a good move, stressing that the fundamentals and potential of the country’s economy are strong with the capacity to meet its debt obligations.

The year will also see to better funding for small and medium enterprises. For instance, the  International Finance Corporation (IFC) report indicates that approximately 96 per cent of Nigerian businesses are Small and Medium Enterprises (SMEs).

Head, Operational Risk Management/Business Continuity, Unity Bank Plc, Lasisi-Yahya Enitan, said there was a need to rescue SMEs through effective policies implementation as they remain the life wire of the economy.

He explained that the COVID-19 pandemic did not only come with “economic dreaded monsters”-risks such as unemployment and inflation but also provided opportunities for businesses to research and come up with the best and suitable business model that can operate at optimal level irrespective of the prevalence of COVID-19.

Enitan said funding alone cannot be adequate for needed intermediation or intervention as a bottom-up policy development strategy should be adopted.

He said the policies are to be structured to target what needs to be done to reduce production/overhead cost, reduce the costs of factor inputs, setting up an integrated and digitalised marketplace for SMEs to aid forward and backward integrated function.

He said the policy driver should push for business automation.

“At the initial stage, SMEs should be persuaded to adopt business automation in their business processes and activities. The persuasion can come in form of lower interest for subsequent facilities. Where persuasion fails, total enforcement of business automation becomes necessary as it brings about lower cost; time savings; high accuracy; better service and greater productivity,” he said.