Re: Cash Will Soon Be Obsolete. Will Nigeria Be Ready ? – Ndubuisi Anaenugwu
Things are moving too fast. Some 18 years ago, when I was a Bank Teller in Onitsha,Anambra State , third party money transfer was nonexistence . Bank Customers have to visit the bank to effect banking transactions including checking of account balances . As a Teller ,It was always a herculean task attending to hundreds of Customers every day for services such as verification of signatures ,checking of account balances ,checking of lodgements into customers’ accounts ,payment of cash etc. But with the revolution in the Nigeria payment system and introduction of bank verification number( BVN ) , the foundation for online banking was solidly laid .
To encourage e- banking and discourage cash handling , Central Bank of Nigeria initiated many control measures including cash handling charges and we have started seeing the effect everywhere with the deployment of point of sale ( POS) machines. This monetary policy efforts have reduced cost of handling cash as well as risk inherent in moving cash from one place to the other .
Is Nigeria ready for digital currency ? What are the advantages and disadvantages of digital currency in developing economy like Nigeria ? Would the introduction of digital currency mark the end of cash operations in Nigeria?
Before we respond to the above questions ,it is important to understand the operations of Mobile Money being operated today in Nigeria .Mobile Money simple means online money stored in mobile phone, application ,POS Machine etc from where banking transactions are executed. Such online storage of money is backed up with the money a customer has in the bank account. In other words, Mobile Phone/POS Machine serves as new bank house to facilitate banking transactions such as money transfers,checking of account balances ,account history ,receiving and payment of cash among others. We can see how effective the deployment of POS Machines have become even in our remote communities. The deployment of POS technology has created about a million jobs in the last one year. It has made banking operations hitch -free ,convenient and cheap as a bank customer can effect payment to anybody at comfort of his home .One can conveniently make purchases online among other uncountable online money transactions. It has covered areas where commercial banks were finding most frustrating to operate because of logistics issues thereby serving the interest of the ‘unbanked’ population. POS technology has taken off the street thousands of unemployed youths ,empowering them and increasing aggregate consumption,savings and investment. A POS operator beside my friend office makes an average of N3000 profit on daily basis. Consider the multipliers effect such financial activities will generate in the entire economy! Mobile Money operations in Nigeria have given hope to millions of frustrated and depressed Nigerians that it is possible to build a prosperous and viable future once the right political and economic decisions are taken and executed to the letters.
Mobile Banking has performed creditably well in the Nigeria payment system .However, even upon the success recorded in the deployment of mobile money applications and point of sale machines, Nigeria has a significantly large population without access to financial services. In 2017, it was home to 3.4% of the world’s unbanked people despite contributing 2.6% to the global population. Some progress has been made over the past decade to bring more Nigerians under the formal financial system, according to a report by EFinA, but the figures remain disturbing.
At the end of 2020, over 36% of the adult population (or 38 million adults) were unbanked as the central bank missed out on its 80% national financial inclusion target. In addition, just over 40 million out of an estimated 105.5 million Nigerian adults have bank verification numbers (BVN), an important metric for gauging how many people have access to financial services.
As at today,about 45% of Nigeria adults have no Bank Accounts and these population have no business with mobile money. This is a country where lawmakers proudly voted ‘no’ for the use of electronic devices to transmit election results for the simple reason that our telecommunication infrastructures are still underdeveloped.
A digital currency could be issued by the State or introduced by a Private Enterprise. Digital Currencies like Bitcoin is issued by a private enterprise for online exchange of goods and services. Much of the interest in these unregulated currencies is to trade for profit, with speculators at times driving prices skyward. Many companies have issued their own currencies, often called tokens, and these can be traded specifically for the good or service that the company provides. To buy cryptocurrencies, one needs a wallet, an online app that can hold currency. Generally, you create an account on an exchange, and then you can transfer real money to buy cryptocurrencies such as Bitcoin or Ethereum.
The legality of digital currency as a medium of exchange depends on monetary authorities. The Central Bank of Nigeria few months ago announced the ban of digital currency -crypocurrency because of fraudulent activities associated with it . But Prof Kingsley Moghalu,a former Deputy Governor of CBN dismissed CBN position insisting that no payment system is devoid of fraudulent and criminal practices .Moghalu advised CBN to consider the possibility of the issuance of its own digital currency as China, Sweden ,Uruguay and other countries are doing. Just few days ago ,CBN accepted Prof Kingsley Moghalu advice and announced the commencement of digital Currency to be called e-naira come October 1st .According to CBN, e-naira will make transactions cheaper with less conflict.
Godwin Emefiele,the CBN Governor confirmed that the economy is going digital and cash cannot play in that space, adding that e-naira, which will represent the digital equivalent of cash, will be used as fiat currency for transactions.
We can now try to address the economic implications of Mr Emefiele e-naira to ascertain the viability of digital currency in the developing economy.
Is Nigeria ready for digital currency such as e-naira? Yes ,Nigeria and Nigerians are ready for digital currency! From the success story of mobile banking in Nigeria , digital currency will induce more Nigerians to be part of rebuilding and rebranding processes. For instance , our pension account is now digitally controlled by pencom but managed by pension managers. Pension account is generated by Pencom and every Nigerian workers is expected to have one unique pension account. The same as National identity card with biometric features to identify and differentiate every Nigerians .With the deployment of these digital technologies, Nigeria is ready for digital currency.
Digital Naira is a monetary instrument that will exist alongside cash as just another monetary option. The effective and efficient deployment of CBN digital naira can mobilize Nigerians towards a desired destination to achieve set economic and political goals. For instance , if the Country wants to encourage citizen participation in the electoral process, a digital currency app will be created and funded with X- amount for anybody who register for voters card between 2021 and 2023 . The same could be done in the National identity card registration and this will facilitate the creation of a reliable data bank for the Country . Lack of reliable data is a major challenge facing Nigeria as a Country and digital currency could facilitate a stimulus package that will address that concern. CBN can use digital naira to serve the interest of the ‘unbanked’ population. Like Pension accounts created by Pencom and managed by Pension Managers, digital naira account can be created by CBN and managed by Commercial Banks and microfinance banks to achieve even and equitable distribution of income as well as induce consumption and stimulate economic activities.
Depending on the CBN application of digital naira , it will always exist alongside the traditional currency. However,the introduction of digital currency can only diminish or reduce the use of cash just as mobile money has done but the overall benefit could be seen from the demand and supply side of money market.
Ndubuisi Anaenugwu
Bvi channel 1