E-Financial
CBN’s eNaira to Grow Nigeria’s GDP by $29bn in 10yrs — Buhari
President Muhammadu Buhari has said that the adoption of Central Bank Digital Currency (CBDC) can increase Nigeria’s Gross Domestic Product (GDP) by 29 billion dollars over the next 10 years.
Buhari made this submission on Monday while performing the formal Unveiling of Central Bank of Nigeria (CBN) Digital Currency, eNaira at the Presidential Villa, Abuja.
He said that, by the introduction of the eNaira, Nigeria had become the first country in Africa, and one of the first in the world to introduce a digital currency to its citizens.
The president said there were Nigeria-specific benefits of the digital currency that cut across different sectors of the economy.
“In recent times, the use of physical cash in conducting business and making payments has been on the decline; this trend has been exacerbated by the onset of the COVID-19 pandemic and the resurgence of a new Digital Economy.
“Alongside these developments, businesses, households, and other economic agents have sought for new means of making payments in the new circumstances.
“The absence of a swift and effective solution to these requirements, as well as fears that central banks’ actions sometimes lead to hyperinflation created the space for non-government entities to establish new forms of private currencies that seemed to have gained popularity and acceptance across the world, including here in Nigeria.
“In response to these developments, an overwhelming majority of central banks across the world have started to consider issuing digital currencies in order to cater for businesses and households seeking faster, safer, easier and cheaper means of payments.’’
According to the president, a handful of countries including China, Bahamas, and Cambodia have already issued their own CBDCs.
Buhari said that a 2021 survey of central banks around the world by the Bank for International Settlements (BIS) found that almost 90 per cent were actively researching the potential for CBDCs.
He said that the survey also found that 60 per cent were experimenting with the technology while 14 per cent were deploying pilot projects.
“Needless to add, close monitoring and close supervision will be necessary in the early stages if implementation to study the effect of eNaira on the economy as a whole.
“It is on the basis of this that the CBN sought and received my approval to explore issuing Nigeria’s own CBDC, named the eNaira.
“This move was underpinned by the fact that the CBN has been a leading innovator in the form of money they produce, and in the payment services they deploy for efficient transactions.
“They have invested heavily in creating a payment system that is ranked in the top ten in the world and certainly the best in Africa.
`This payment system now provides high‐value and time‐critical payment services to financial institutions, and ultimately serves as the backbone for every electronic payment in Nigeria.’’
President Buhari said the apex bank had also supported several private‐sector initiatives to improve the existing payments landscape, and in turn, had created some of the world’s leading payment service providers.
He said that the efforts to create Nigeria’s digital currency began in 2017.
“While the journey to create a digital currency for Nigeria began sometime in 2017, work intensified over the past several months with several brainstorming exercises, deployment of technical partners and advisers.
“Collaboration with the Ministry of Communication and Digital Economy and its sister agencies like the Nigerian Communications Commission, integration of banking software across the country and painstaking tests to ensure the robustness, safety and scalability of the CBDC System.
“Let me note that aside from the global trend to create digital currencies, we believe that there are Nigeria-specific benefits that cut across different sectors of, and concerns of the economy.
“The use of CBDCs can help move many more people and businesses from the informal into the formal sector, thereby increasing the tax base of the country.
“Alongside digital innovations, CBDCs can foster economic growth through better economic activities. Indeed, some estimates indicate that the adoption of CBDC and its underlying technology, called blockchain, can increase Nigeria’s GDP by 29 billion dollars over the next 10 years.’’
He said that CBDCs could also 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.
“It is on this basis that I am delighted to officially launch the CBN Digital Currency, called the eNaira, and in so doing, we have become the first country in Africa, and one of the first in the world to introduce a Digital Currency to her citizens.’’
Buhari commended Godwin Emefiele, CBN Governor, his deputies and the entire members of staff who worked tirelessly to make the day a reality.
In his remarks, Emefiele said that the eNaira was Nigeria’s CBDC and the digital equivalent of the physical Naira.
According to the CBN governor, the eNaira – like the physical Naira – is a legal tender in Nigeria and a liability of the CBN.
“The eNaira and Naira will have the same value and will always be exchanged at 1 naira to 1 e-Naira,” he said.
Nigerians have more trust in Bitcoin-based systems than in traditional alternatives such as banks and government, a new report by Elastos, an open-source blockchain website, has stated.
According to its inaugural BIT Index (Bitcoin; Innovation & Trust), emerging markets are driving the adoption of Bitcoin, with Nigeria and the UAE leading the charge.
The report revealed that 66 per cent of Nigerian respondents and 35 per cent from Brazil had more confidence in Bitcoin-based systems than alternatives like banks or national governments, compared to just 16 per cent in Germany and 21 per cent in the UK.
The survey also revealed that 20 per cent of Nigerian consumers use Bitcoin to conduct transactions at least once a day, while 67 per cent would have more trust in Bitcoin to protect their life savings than traditional services like banks, local governments, and cash.
According to the platform, the research was compiled from online interviews conducted with 1,407 self-defined ‘tech savvy’ respondents in Brazil, Germany, Nigeria, South Korea, the UAE, the UK, and the US.
It stated that the interviews were completed by a third party, a registered market research company, between March 30 and April 4, 2024.
“When it comes to ensuring the integrity of online transactions, emerging market respondents also revealed their relative confidence in Bitcoin compared to alternatives,” it indicated.
According to the report, 66 per cent of Nigerian respondents and 35 per cent of Brazil have more confidence in Bitcoin-based systems than alternatives, such as banks or national governments, compared to figures of just 16 per cent (Germany) and 21 per cent (UK) who feel the same.
Meanwhile, Jonathan Hargreaves, Elastos’ global head, Business Development & ESG, described the BIT Index’s inaugural findings as indicative of the role the ‘global south’ was playing in the adoption of decentralised currencies such as Bitcoin.
“The BIT Index offers a fascinating and sobering insight into the industry. The fact that over two-thirds of Nigerian consumers and a third of their counterparts from the UAE and Brazil would feel more confident entrusting their life savings to Bitcoin rather than traditional financial instruments speaks volumes about the protagonism these regions are already playing.
“In many instances, the driving factor is the absence of viable, accessible alternatives to, for instance, conduct cross-border transactions or mitigate the impact of inflation,” he said.
According to Chainalysis, a cryptocurrency research firm, Nigeria’s crypto transaction volume grew year-over-year to $56.7bn in 2023.
It stated that the country’s crypto economy continued to grow despite market turmoil in the space.
On the contrary, the government has been taking strong measures to restrict and clamp down on cryptocurrency exchanges and platforms operating in the country.
Central Bank of Nigeria (CBN) has awarded the country’s second Payment Terminal Service Aggregator (PTSA) license to Unified Payments, Nigeria’s premier financial technology company, following a rigorous and transparent process,
The move is targeted at enforcing existing requirement that all transactions from point-of-sale channels in Nigeria must go through a licensed Payment Terminal Service Aggregator (PTSA).
The CBN is enforcing the laws to clamp down on financial crimes and other market misconducts and it aligns with the CBN’s objectives to fully track all electronic transactions in Nigeria, given the propensity of using such transactions to fund insecurity, violent crimes, banditry, kidnapping as well as other vices.
According to one analyst, “By awarding a second PTSA license, the apex bank has proactively responded to industry operators who had expressed serious concerns about channelling all transactions through a single aggregator, the Nigeria Interbank Settlement System PLC (NIBBS), as has been the case for some years.
“With the new policy direction, payments service providers would henceforth route all transactions through either of the two licensed Companies.”
Other financial analysts and industry players have commended the Central Bank, affirming that “the move can be a massive step in the right direction. They also commended the open, transparent, and inclusive manner via which the selection process was managed, and the license awarded.
“The selection process, which lasted for months, began with an invitation for qualified organisations within the payment industry to submit an Expression of Interest document, alongside other requisite documentation and additional capital requirement of N1 billion.”
The new management of CBN decided not to give the license out without going through an open process – and for the first time in licensing a payment service provider – the apex bank went through a public bid process outlined in its publication of Friday, January 5, 2024, in different national newspapers. At the end of the process, Unified Payments emerged as the most preferred service provider.
Unified Payment Services Limited, also called Unified Payments or UP, is a shared service provider within Nigeria’s financial technology sector owned by a consortium of Nigerian banks. For over 26 years, the firm has provided payment technology to banks and other industry operators. The first and only non-bank entity that is a principal member and licensed acquirer of all of American Express, Mastercard, Visa, UnionPay and Payattitude. Unified Payments facilitates both local and international transactions.
Formerly known as ValuCard Nigeria Plc, Unified Payments led the way to introduce POS payments in Nigeria under its card scheme known as ValuCard which is the first payment card to be issued in Nigeria. The company later transformed into a scheme-neutral and option-neutral service provider enabling transactions under different schemes.
The company has continued to provide leading payment technologies and services, enabling different operators to leverage its capabilities and licenses, enabling prompt and seamless transactions.
Among the shareholders of Unified Payments are First Bank, Access Bank, United Bank for Africa (UBA), Guaranty Trust Bank Plc, Zenith Bank and Fidelity Bank. Other shareholders are Citibank Nigeria Limited, Ecobank of Nigeria Plc, First City Monument Bank Plc, Keystone Bank Ltd, Polaris Bank Ltd, Stanbic IBTC Bank Plc, Sterling Bank Plc and Wema Bank Plc.
Chartered Institute of Bankers of Nigeria, CIBN, has expressed support for the ongoing banking recapitalization exercise saying it will empower banks to lend more to the economy.
CIBN President, Dr. Ken Opara stated this yesterday while speaking at the annual lecture of the institute in Lagos, with the theme “Improving Availability of Credit in the Nigerian Real Economy: The Critical Importance of Liquidity.”
Okpara noted that the volume of credit to the real sector activities namely agriculture, manufacturing and services is low compared to their critical role in driving economic growth.
Consequently, he called for more credit to the real sector, saying, “I propose that we consider offering more credit to these key sectors and particularly the agriculture sector. It is for this reason that the Recapitalization exercise is a welcome development.
“The recently announced upward review of the Minimum Capital Requirements of Nigeria by the Central Bank of Nigeria would further empower banks to extend more credit to the economy’s productive sectors.”
To address these factors impeding credit to the real sector, Okpara suggested that, “The government needs to improve further the ease of doing business and infrastructural development, such as power, roads, rail networks, etc.
“Setting up industrial centres where these companies can co-habit and share common infrastructure. Harmonize and reduce the various taxes and levies, including locating them in a single hub.
“Banks need to be deliberate in de-risking these companies via Capacity building programmes, and Advisory services.
Specialised Financial Institutions can be created in addition to the Bank of Industry (BOI), especially credit guarantee agencies and risk-sharing institutions, to further facilitate the deepening of credit as practiced in countries such as China which significantly transformed its economy.
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