Few days ago, the Federal Government of Nigeria announced that it would be introducing a local or homegrown crypto currency. This digital currency will be called e-naira. Many people have applauded the FG for taking this step, especially when other countries like India, China, South Africa, Ghana etcetera have also decided on a home-grown digital currency.
However, while some people have questioned the rationale for such introduction and the value to the economy, others have simply concluded that it is a project that will fill, the void of inaction, giving the government a sense of psychological satisfaction.
Recall that before October 2020, crypto currency trading was the first choice investment channel for mostly the youths and few adults too. The United States of America was the only country ranked ahead of Nigeria in crypto currency trading. This is because our population is youthful; we have a bubbling tech ecosystem; an unstable currency and a high remittance activity. The industry boomed and the people prospered.
This was the position until the #EndSars protest in October 2020 when despite every effort by the FG to stop the flow of financial support for the organizers, cash still flowed unabated as contributors had gone underground through the use of crypto.
This was followed by the 27% reduction in diaspora remittances that year when crypto trading in Nigeria climaxed three hundred and ten million dollars. The ban, which followed in February 2021, was therefore not a surprise, driving the operators underground.
However, government needs to come clean and embrace reality with regards to comparing e-Naira to a crypto currency like Bitcoin, for instance. Both are not the same and do not meet the same need. It will be noticed that people prefer Ponzi schemes to conventional regulated financial houses. It was reported recently that Nigerians lost about fifty million dollars to MMM during its reign.
One major attraction to crypto in Nigeria was the fact that it was not regulated. This has also accounted for the reason why the Nigerian economy, despite all the shocks, has not been reduced to the level of other countries that suffered the same fate. The Nigerian economy is unstructured and informal; so anything that requires structure, regulation and order may become unpopular with the people.
Another major attraction of Nigerians to crypto is the adrenalin rush, which bothers on the high risk associated with it. Many Nigerians like to sow and reap quickly. They despise patience when it comes to investment. If the e-naira lacks these two attributes, it is less likely to succeed.
Again, the Federal Government should not forget its relationship with the larger populace and the reasons behind the ban of crypto. Many Nigerians believe that the government has continued to devise ways to monitor the financial activities of the population and that the floatation of e-Naira does not come with true intentions. This lack of trust between the government and the populace is an issue that sabotages the idea.
Some people have had their accounts frozen for their involvement with the protest against government activities and they had to move their investment to crypto to evade government watch. The attribute of centralization and monitoring creates a sharp difference between e-Naira and crypto and may be a bane to the success of e-naira.
Furthermore, as a regulator, the CBN, has in its guidelines for financial institutions, the permissible and non-permissible business that the licensed institutions must or must not engage in. One of the businesses that must not be done by financial institutions is any business that is speculative in nature. A true Crypto is speculative and does not have a static value. The question many are asking is: Is the CBN going to superintend over a speculative business? What would they do should e-Naira lose value? Will they still have the confidence of the public? The role of the CBN as Bankers of last resort does not only mean bankers to the Bankers but Bankers to the common man. The confidence that no bank will elope with any depositor’s money has made the common man continually put their trust in the CBN. Is the CBN ready to allow this confidence to vanish should the common man lose value on e-naira?
CBN should be involved in what will not cause sleepless nights for owners. Federal Government should use local realities to solve local problems. While we applaud and emulate other countries for doing the same, the peculiarity of our system should drive us to a more innovative alternative.
WRITTEN BY ADOLPHUS ABRAHAM