While Nigerians and the Central Bank of Nigeria (CBN) are still basking in the euphoria of the successful launch of the country’s version of digital currency, eNaira, a new report has raised the alarm the lack of trust in Federal Government’s disposition to policies could negatively affect the prospect of the initiative.
According to the Bitcoin.com News report, skeptical analysts believe a lack of trust in the government will ultimately limit the e-naira’s prospects for success.
It noted that in addition, some analysts insist the digital currency’s already tenuous position is made worse by the fact that it has to compete with fintech startups.
Just this week, the International Monetary Fund (IMF) said that the launch of eNaira was drawing substantial interest from the outside world including central banks.
In an explainer written by Jack Ree, an economist in its African Department, the Fund attributed the worldwide interest in the eNaira to “the size and complexity of Nigeria’s economy.”
Noting that its Monetary and Capital Markets Department “has been involved in the eNaira rollout process, including by providing reviews of the product design,” the IMF said it remained available to help with technical assistance and policy advice on the eNaira, which, according to the Bretton Woods institution, is the second Central Bank Digital Currency (CBDC), “fully open to the public after the Bahamas.”
The Fund pledged that it was ready to collaborate with the Nigerian authorities on “Data analysis, cross-country studies, sharing the eNaira experience with other countries, and discussing further evolution of the eNaira including its design, regulatory framework, and other aspects.”
It pointed out that while the eNaira, like digital currencies elsewhere, carries risks for monetary policy implementation, cyber security, operational resilience, and financial integrity and stability, the country’s authorities had taken measures to manage the risks.
As previously reported by Bitcoin.com News, Nigeria is home to some of the biggest fintech startups and is a country that receives a relatively large chunk of the continent’s fintech investment.
The report quoted a Financial Times report as saying that it is this threat from well-funded fintech startups that raises questions about the e-naira’s chances of fulfilling some of the CBN’s goals like bringing more people into the financial system or allowing for more targeted social and welfare spending.
One of the analysts who is quoted in the report casting doubts about the e-naira’s prospects of succeeding is Adedayo Ademuwagun, an analyst at Songhai Advisory.
According to Ademuwagun, most of the goals that the CBN hopes to achieve with the digital version of the naira are already being addressed by privately owned fintech startups.
“The issue is that all of this can already be adequately addressed using the existing financial payments system. Nigeria is the fintech capital of Africa, so there are just so many options, so many ways to pay somebody, and pay them fast, already,” Ademuwagun was quoted to have said.
However, another analyst, Ronak Gadhia of EFG Hermes thinks the belief the government will monitor all e-naira transactions may be enough to dissuade some from using the e-naira.
“The government effectively knows every transaction you carry out [with a digital currency] and in a place like Nigeria where there’s a bit of mistrust between ordinary Nigerians and the government there may be skepticism in terms of adoption,” the report quoted Gadhia explaining.
Further, to support his argument, Gadhia points to how the Nigerian government was able to suffocate the #EndSARS protests by simply freezing the bank accounts of individuals that had organised the protests.
Despite expressing his doubts about the e-naira’s prospects, Gadhia insists it is still too early to judge or dismiss the digital currency’s potential.