The Federal Government of Nigeria, through the Central Bank of Nigeria, recently announced the introduction of a local, or homegrown, cryptocurrency. This digital currency will be known as the e-naira. Many people have praised the FG for taking this step, especially since other countries such as India, China, South Africa, Ghana, and others have also decided to create their own digital currency. Nigeria should not, as we say in our language, “carry last.”
While some have questioned the rationale for such an introduction and its value to the economy, others have simply concluded that it is a project that will fill the void of inaction, providing the government with a sense of psychological satisfaction. Remember that prior to October 2020, cryptocurrency trading had become common and widespread.
It has become the preferred investment channel for the majority of young people (and few adults too). In terms of cryptocurrency trading, the United States of America was the only country that ranked higher than Nigeria. Why was this the case? Our population is young; we have a thriving tech ecosystem; we have an unstable currency, and we have a high remittance activity. Top government officials, financial experts, and notable businessmen were rumored to have invested heavily in cryptocurrency. The economy grew, and the people prospered.
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This was the case until the #EndSars protest in October 2020, when despite the FG’s best efforts to halt the flow of financial support for the organizers, cash continued to flow unabated because contributors had gone underground via the use of crypto. This resulted in the failure of an age-old classical military tactic. This failure was followed by a 27% decrease in diaspora remittances that year when crypto trading in Nigeria reached a high of $309.6 million. As a result, the ban, which took effect in February 2021, came as no surprise, driving the operators underground. While many are looking for alternatives, the Central Bank of Nigeria (CBN) continues to assure Nigerians of the tremendous opportunities that the concept of e-naira will bring. The crux and motivation for this article is the government’s assumption.
One, I believe the government should be forthright and accept reality when comparing the e-Naira to a cryptocurrency such as Bitcoin. Both are not the same and serve different purposes. I’ve read many comments on this topic from people explaining why it’s not the same. Those technical considerations are unimportant to me. I’m only concerned with everyday reasons on the street, why they’re not the same and why people won’t accept them as such. Have you noticed that our people prefer Ponzi schemes to traditional regulated financial institutions? It was recently reported that Nigerians lost approximately $50 million to MMM during its reign and that a certain forex trading outfit with branches across Nigeria went bankrupt with over N171 billion in investor funds.
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‘One of the most appealing aspects of cryptocurrency in Nigeria was the fact that it was unregulated. Our people are informal and unstructured, and we all thrive in this environment. This explains why, despite all the shocks, the Nigerian economy has not been reduced to the level of other countries that have suffered the same fate. Because the Nigerian economy is so unstructured and informal, anything that necessitates structure, regulation, and order may be unpopular with the people. Another major draw for Nigerians to cryptocurrency is the adrenaline rush, which distracts them from the high risk involved.
‘Many Nigerians enjoy sowing and reaping quickly. When it comes to investment, they despise the farmers’ patience. The e-naira is less likely to succeed if it lacks these two characteristics.
‘Two, the FG should not lose sight of its relationship with the general public and the reason(s) for the crypto ban. Many Nigerians believe that the government has continued to devise methods to monitor the financial activities of the populace and that the floatation of the e-Naira is not based on genuine intentions. The lack of trust between the government and the populace is a problem that jeopardizes the concept.
Some people’s accounts have been frozen as a result of their participation in the anti-government protests, forcing them to shift their investments to cryptocurrency in order to avoid government scrutiny. The attribute of centralization and monitoring distinguishes e-Naira from crypto and may be a hindrance to e-success.
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Three, the CBN, as a regulator, specifies in its guidelines for financial institutions the permissible and non-permissible business that licensed institutions may or may not conduct. Any business that is speculative in nature is one that financial institutions must not engage in. A true cryptocurrency is speculative and does not have a fixed value.
Many people are wondering if the CBN will be in charge of a speculative business. What would they do if the e-Naira fell in value? Will the public still have faith in them? The CBN’s role as bankers of last resort entails not only being bankers to the bankers but also being bankers to the common man. The common man continues to put his trust in the CBN because he is confident that no bank will elope with any depositor’s money. Is the CBN willing to let this confidence fade if the value of the e-naira falls?
On the part of the proponents, I’ve read that e-naira would make life easier for owners and would be risk-free. Yes! This, I believe, should be the case. The CBN should be involved in what will not keep owners awake at night.
Many argue that the e-Naira is simply a means of payment, a cash alternative devoid of the trappings of cryptocurrency. Individuals can keep their money in the CBN’s wallet. What happens to the balance in the wallet, however, is important to the general public. Is it going to be subjected to the forces of supply and demand to modulate its value, or will it be available for transactional purposes?
Because of the speculative and volatile nature of cryptocurrencies, many people have become wealthy. Some claim to have invested one hundred dollars and now have balances of over three hundred thousand dollars in just a few years. This is not a feature of the e-Naira. I urge the FG to solve local problems with local realities.
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However, for the reasons stated above, the concept of a digital currency is brilliant and welcome. The peculiarity of our system should drive us to a more innovative alternative, which is why we applaud and emulate other countries for doing the same.
The FG should not minimize the importance of trust. It will be the primary survival indicator for the e-naira. If the government must get involved in crypto, I recommend that they create a separate industry that will accommodate all of the razzmatazz, adrenaline rush, and so on, and keep it separate from traditional banking activities.
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