By Emeka Anaeto
There are indications that Nigeria has entered a new wave of digitization in the financial services ecosystem following the successful implementation of the Central Bank Digital Currency, CBDC, initiative by the Central Bank of Nigeria, CBN.
Already the apex bank has signaled the commencement of the second phase of the initiative with the successful conclusion of the eNaira Hackathon program last month.
The second phase is intended to drive financial inclusion by onboarding unbanked and underserved users leveraging offline channels.
The apex bank said that under the second phase Nigerians will be able to open an eNaira wallet and conduct transactions by simply dialling *997 from their mobile phones.
Speaking on the deliverables and the implementation of the CBDC program, CBN Governor, Godwin Emefiele, said when the eNaira was launched in October 2021, “the Bank promised to increase the level of financial inclusion in the country because just like the Naira, the eNaira is expected to be accessible to all Nigerians and would provide more possibilities to bring in the unbanked into the digital economy.
He said, since the launch of the initiative, the eNaira had reached 840,000 downloads, with about 270,000 active wallets comprising over 252,000 consumer wallets and 17,000 merchant wallets. In addition, he said volume and value of transactions on the platform had been remarkable, reaching above 200,000 and N4.4billion.
Besides individuals using the USSD code, the Governor said merchants and consumers with bank accounts will be able to use the NIBSS Instant Payment (NIP) to transfer and receive eNaira to any bank account, stressing that this will further deepen the integration of the eNaira with the existing national payment infrastructure.
Emefiele disclosed that despite the successes recorded on the initiative, the Bank, in collaboration with private sector operators, had started the second phase of the eNaira.
He stated: “The second phase of the project has begun and is intended to drive financial inclusion by onboarding the unbanked and the underserved users leveraging offline channels. Hence greater success is envisioned for the project with phase two expected to deliver more gains with the target of eight million users based on estimation using the diffusion of innovation model.”
Noting the success of the eNaira Hackathon, Emefiele revealed that the hackathon recorded a sizeable interest from young and innovative Nigerians with a total of 4,667 registrations, comprising 4,082 male and 582 female applicants.
He added that this feat would be “birthing innovative solutions for a modern Nigeria and the first step towards expanding the Central Bank of Nigeria’s innovative financial ecosystem”.
Also the CBN Deputy Governor, Economic Policy, Dr. Kingsley Obiora, said the use of cash, as a means of payment, was declining globally, hence the minting of currency by the central banks across the globe had reduced over the past few years.
He said the CBN had blazed the trail with the launch of the eNaira, by responding to the yearnings of digital payment system, adding that other central banks were currently understudying Nigeria’s model of the digital currency said.
“This is the way the world is going. If you don’t jump into the train, it will leave you,” he noted.
Meanwhile, the Group Head, African Fintech Foundry, technical partner to the CBN, Daniel Awe, commended the apex bank for transforming from a traditional regulator to a smart and innovative one.
In addition to the numerous advantages of the eNaira initiative, CBN notes that digitalization of its currency will help facilitate international remittances and FX exchange, drive financial inclusion by understanding the target audience’s needs and help SMEs and startups to create innovative products or enhance their existing services.
Furthermore, the electronic currency will help facilitate cross-border trade and transfers, facilitate payment for lifestyle services, reduce the cost of inter-bank transfers, and achieve transparency and monitoring through programmable tokens.
It is also expected that with the dominant position of Nigeria’s economy in the continent of Africa CBN’s CBDC will make the eNaira the African Gateway to Digital Economy.
PwC, in its 2022 global Central Bank Digital Currency (CBDC) index and stablecoin overview, noted that over 80% of central banks are exploring CBDCs for either wholesale or retail purposes. CBN’s eNaira which was launched in October 2021 was the first CBDC in Africa, ranked number 1 in the PwC’s Top 10 Retail CBDC projects index.
The CBN’s CBDC was built on seven core principles, namely: inclusivity, innovation, efficiency, resilience, scalability, transparency and proudly Nigerian. The goal, according to the CBN, is to strengthen the payments ecosystem while enhancing the financial inclusion framework.
The digital currency runs on a two-tiered CBDC architecture which sees the CBN on top with the responsibility of designing, issuing, storing and distributing the eNaira, while financial institutions, International Money Transfer Operators (IMTOs) and other financial agents fall in the second tier, serving as retailers of the eMoney to individuals and businesses.
The apex bank had organized the hackathon as a computer programming event is the to ideate use cases for the CBDC eNaira powered by the CBN. The event saw an influx of 4,667 registrations comprising 4,082 males and 582 females.
At the hackathon’s grand finale, Emefiele stated: “the eNaira will make a significant positive difference to Nigeria and Nigerians. It was also developed to provide Nigerians with a cheap, safe and trusted means of payment. It is unlike the offline payments channels like agent networks, USSD, wearables, cards and near-field communication technology.
“The eNaira would give access to financial services to underserved and unbanked segments of the population,” he added.
In an interview on the significance of the hackathon, the head of the AFF, Daniel Awe, said: “the hackathon is a platform where innovators, developers, entrepreneurs, coders come together, to solve problems, to create innovative ideas.
“When we layer that on eNaira, it means we brought in different players within the ecosystem – developers, coders, innovators, entrepreneurs, to come up with different ideas, different use cases, that they can leverage on eNaira. This is so that the consumers of eNaira will now see the benefit of eNaira, they will have the opportunity to see the problem that eNaira will solve,” he added.
The African Fintech Foundry (AFF) is an Access Bank initiative that aims at nurturing and accelerating the growth of Fintech startups in Africa. It seeks to shore up the business capacity of startups, support business development, and facilitate access to capital, markets, customers and global innovation partners through guided ideations, hackathons and accelerator programs.
Speaking into the prospects of the digital financial Nigeria, Emefiele stated: “The second phase of the project has begun and is intended to drive financial inclusion by onboarding the unbanked and the underserved users leveraging offline channels. Hence, greater success is envisioned for the project with phase 2 expected to deliver more gains with the target of 8 million users based on estimation using the diffusion of innovation model.”
Dr. Andrew S. Nevin, Financial Services Leader and Chief Economist at PwC Nigeria, believes that: “DLT has the potential to be a game changer for sustainable and inclusive development, particularly for countries in Africa.”
In the PwC CBDC index and stablecoin overview, he said: “CBDCs will transform the payment system, as low value-added transactions become possible in a costless and secure way for everyone. The success could also catalyze more complex and transformative CBDC uses, including Blockchain Identity Management, Land Registry, and Supply Chain Verification.
“As each of the use cases develops, we can bring more people into the economic and financial system and lift tens of millions out of poverty,” he added.