E-NAIRA: How does the eNaira work?

    The eNaira is a digital currency. And Nigeria is not the only country creating its own digital currency. Over 80% of central banks a...


The eNaira is a digital currency. And Nigeria is not the only country creating its own digital currency. Over 80% of central banks are now looking into the possibility of creating their next evolution of money: Central Bank Digital Currencies (CBDCs). 

And why financial inclusion? Financial inclusion is important if we want to reduce the poverty rate in Nigeria. Cute, 60 million Nigerian adults lack access to formal financial services.

The central bank has set a target to achieve 95% financial inclusion in Nigeria by 2024. The initial target was 80% by 2020. But with 36% of Nigerian adults currently financially excluded, the eNaira faces a tremendous task, if it is to meet its objective.

The idea behind digital currencies and financial inclusion is that those who are currently unable to access financial services can at least enter the financial system through central banks directly, without opening a commercial bank account.

How does the eNaira operate? An account number is not required to access the eNaira, but users must have a National Identification Number (NIN) before they can transact with the eNaira. And as we know, logistics problems with obtaining NIN continue to persist. 

That aside, downloading the eNaira digital wallet will require a smartphone. Though 90% of the total population have mobile phones, only around 10%-20% use a smartphone. 

Majority of Nigerian mobile users have phones that offer only basic functions like voice calling and text messaging. And 16% of households who use smartphones struggle to pay for the internet. This isn’t looking good for financial inclusion.

The function of the eNaira also seems to be limited to transactions. If all the digital currency does is allow more people to make transactions without access to the full suite of financial products and services, then we still have a long way to go.

Financial inclusion means creating a world where Nigerians can access and use various financial services to preserve and grow their wealth. Insurance policies are only available to 2% of the population. And only 3% of Nigerian adults have access to loan services.

The eNaira on its own cannot achieve financial inclusion, not without an entire revamp of the country’s economic system happening first. It also does not address Nigeria’s pressing economic troubles - high inflation, low foreign direct investment and low non-oil exports.

The digital naira is going to be valued at par with the physical naira. And if the eNaira is just a digitised version of a currency that has not been performing well, it will not deliver the change we are all so desperate to see. 


Source: StearsBusiness





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ANYIGBALEFT: E-NAIRA: How does the eNaira work?
E-NAIRA: How does the eNaira work?
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