Tunde Chris Odediran
If you do not have money in the bank, you do not attempt fund a transfer from your mobile device.
And money does not get into one’s account, to start with, without some hard work to generate income.
Those who get this simple economic logic must be wondering why the government is selling a misleading logic that the digitization of the naira adds much value to the economy.
It does not, and it is time to talk about it.
Launching the eNaira electronic currency recently, the Buhari administration encouraged all the wrong expectations about what it means, acting as if Nigeria had just launched a mission into space. It was bloated and misleading public relations.
The administration claimed that the eNaira will make Nigeria richer by $29 billion within 10 years, as if Nigeria had found a treasure hidden from other nations.
Nigerian politicians never stop trying to confuse us but we hardly need more than basic economics learned in high school to make sense of the discombobulated arguments that officials try to use to make us feel good about terrible economic decisions.
The eNaira is just cryptocurrency or digital money.
While it may make the economy more efficient in limited ways, there is no likelihood it will be a money spinner.
We must take off from the basic economic premise that any kind of money is not wealth by itself.
Governments have been printing money for years but more money leads to more trouble when it is not backed up with production.
Money is a promise, an agreement for the exchange of goods. It is a measure or representation of wealth.
Money does not create money, it is simply a stored form of value and an agreed medium to exchange value.
Rather, it is productivity that creates money, Money is used to create more value and the return is stored as money.
Money grew out of the coincidence of wants; a need to exchange goods.
You have a goat, I have palm oil.
Money is what solves the problem of exchange in that you can quantify the value of your possession to facilitate the exchange.
Currency does not replace the value of either the goat or palm oil, upon which the value is set.
In human history, all kinds of materials had been used as money, from cowrie shells to gold, to paper.
The human race has reached another milestone in which technology has allowed us to spend money without physical material.
Every form or transaction is moving from the physical to the digital, such that Non-Fungible Tokens or NFTs is becoming the most popular means of selling artworks and other digital rights.
The eNaira has not introduced much of what we don’t already do.
Most Nigerians exchange goods using bank transfers regularly. “Alert” is a word that everyone understands.
The eNaira is just another form of “alert.”
It does not create money in any way for the government or the people to spend.
It will neither make Nigeria richer nor poorer, no matter the official spin.
Stripped of the technological jargons, the eNaira is just another form of digital money, which includes electronic transfer and Point of Sale transactions, all of which avoid paper notes.
Transactions have been electronic for as long as you’ve been using digital alternatives to the traditional cash-based transactions.
Nigeria has not reached a watershed milestone when it launched the eNaira ahead of many other countries.
Contrarily, Nigeria released experimental electronic money without adequate research and preparation, out of its desperation to avoid a run on the naira, which had become a legal tender that Nigerians hate to hold.
The naira’s value declines too quickly for it to be regarded as money.
The eNaira’ s careless rollout resulted in three disgraceful missteps out of the gate.
First, the eNaira became a subject of a dispute immediately, as the name was trademarked to a Nigerian company.
The launch was quietly postponed while quiet negotiations took place. We will never know how the matter was resolved with the registered owner of the tradename.
Secondly, the mobile app was withdrawn soon after its release, apparently because it was not ready for prime time.
Thirdly, an online medium called attention to plagiarized statements by the Central Bank of Nigeria, which clearly indicated that the contractor behind eNaira was a copycat, greatly embarrassing the nation.
While there has been a reckless approach to crypto, other nations are carefully approaching the use of wallets for banking.
Only seven countries have been bold to launch what is called the Central Banks Issued Digital Currency (CBDC) before Nigeria did – and they are all small Caribbean island nations.
They include the Bahamas, Saint Kitts and Nevis, Antigua and Barbuda, St. Lucia, Saint Vincent and the Grenadines and Grenada.
CBDC is virtual money issued and backed by a country’s central bank. It is the response of the government to the competition from other media of exchange in cryptocurrency and stable coins.
Cryptos do not have the involvement of the official financial systems and are easily becoming legal tender.
According to the Atlantic Council, “87 countries (representing over 90 percent of global GDP) are still exploring a CBDC.” In Africa, South Africa is conducting its test with Singapore, Malaysia, and Australia in a project named Dunbar.
Serious nations are not rushing to normalize untested currency.
The US, Japan, European Union and England are not even showing enough interest, even though they have the lion share of the global economy. Only 17 countries that have a large economy, such as China and South Korea, are in the pilot stage.
Experts believe that for CBDC to work, there needs to be a new framework for international financial systems. Such standards and systems do not currently exist, so Nigeria’s eNaira is hardly interoperable.
Besides, CBDC poses great challenges.
There is yet no strong protection against cyber attacks and money laundering. If security is easily compromised, why is Nigeria putting Nigerians at risk?
Nigerians should be inquisitive. Why is Nigeria desperate to be like St. Lucia, a nation with a population of approximately 184,000?
CBDC is immature. The desperate urge to avoid the complete abandonment of the failing Naira by Nigerians is pushing Nigeria to the brink but it won’t solve economic challenges.
As the Naira becomes more of a tissue paper, having lost more than 300 per cent of its value in two years, Nigerians have been looking for safer ways to keep their wealth.
It nurtured an appetite for cryptocurrency.
Bitcoin trading platform, Paxful, reported that Nigeria is now second only to the US for bitcoin trading. Blockchain research company, Cainalysis, also reported that the dollar volume of cryptocurrency in Nigeria in May, 2021, was $2.4bn, up from $684m within the previous six months.
According to British newspaper, The Guardian, “an array of factors, from political repression to currency controls and rampant inflation, have fueled the stunning rise of cryptocurrencies in Nigeria.”
The decreasing value and the abandonment of the naira caused Nigeria to outlaw cryptocurrency in February, 2021, with the Central Bank Governor, Mr. Godwin Emefiele claiming cryptos were unsafe for the economy.
While we know that desperation is the driver, what we do not know is why the Buhari administration is boasting while putting Nigerians’ wealth in danger.
At its launch in Abuja, President Muhammadu Buhari said in a speech: “Nigeria has become the first country in Africa, and one of the first in the world to introduce a digital currency to her citizens.”
Within days of its launch, the Central Bank posted one of the scariest caveats for any product. The disclaimer was so strong that one wonders why anyone would even want risk it with the eNaira. Not much has been heard in terms of public information since.
Nigeria’s foray into cryptocurrency is out of desperation.
While other nations are still studying the best ways to stem the tide of non-relegated private cryptos, Nigeria goes headlong with little expertise.
The eNaira is still pegged to the naira. If you have 500 Naira, it is still 500 eNaira. You are neither richer, nor poorer.
Nigeria continues to pile up debt and increasingly has less to spare after it pays the principal on its debts.
The economy is not getting better.
How should you look at it? If you save one naira a day, you will still have less than one dollar after a year.
You can save your money in naira or eNaira. The result is the exactly the same.
What Nigeria needs is a strong Naira, whether it is paper or digital or crypto.
A currency based on productivity, exports and strong revenue. The problem is that Nigeria is buying nation; not a producing one.
The effort of the government should be directed at stimulating production.
The eNaira is much ado about nothing. It has little to do with creating wealth.
