Compass Money: Nigeria’s First-in-Africa Digital Currency Launch Faces Technical Difficulties
Godwin Emefiele is shown with Christine Lagarde, former IMF Managing Director and current President of the European Central Bank. Financial leaders hope digital currencies will encourage international development. (Flickr)
Nigeria’s digital e-naira has been beset by technological problems since it officially launched on October 25. President Muhammadu Buhari and the governor of Nigeria’s central bank, Godwin Emefiele, announced the currency in the capital of Abuja. The e-naira is the first full digital currency in Africa, though other countries such as South Africa have begun exploring the field.
However, governments looking to go digital might be more hesitant after users of the e-naira reported many technical issues since the launch of its digital wallet. The e-naira is used via two apps, eNaira Speed Wallet and eNaira Speed Merchant Wallet. These are respectively intended for customers and vendors, but various glitches and processing errors caused customers to leave negative reviews on both apps.
User Clem Anifowose left a one-star rating and said, “I wanted to rate it zero. How useful can an app be when you cannot even sign up?” As of this article’s writing, the Apple App Store’s mean rating of the individual wallet app is 2.1 stars, while its merchant version has 2.5. Similar poor reviews caused the app to be pulled from Android stores, and it has not yet returned. Despite these technical challenges, President Buhari’s government maintains its expectation that the e-naira will increase Nigeria’s GDP by $29 billion over the next decade.
The e-naira joins the Bahamian Digital Sand Dollar and the Digital Eastern Caribbean Dollar as a full central bank digital currency (CBDC). Nigeria is also following in the footsteps of China, the world’s first major economy to announce a CBDC. As the most populous and highest-GDP country in Africa, Nigeria has several key parallels with China. Digital currency is only the latest such parallel, and China’s digital renminbi has already seen widespread adoption. Around 140 million people have opened accounts and spent 62 billion Yuan, or $9.5 billion.
One factor that separates CBDCs from other virtual currencies is stability. While cryptocurrencies like Bitcoin and Etherium are noted for their volatility, CBDCs should avoid such extreme fluctuations. This relative stability is because they are government-issued and maintain the same value as physical currency. Other advantages of CBDCs include cost-effectiveness, financial inclusion of the unbanked, and better oversight to track financial crime.
On the other hand, CBDCs have several risks that might discourage their use. One problem is cybersecurity, as large volumes of digital currency could become the targets of cyberattacks that have affected other sectors of the economy. Privacy concerns are another drawback of CBDCs because they provide governments with direct control over financial transactions. Many are wary about this centralization, prompting concerns about the weaponization of CBDCs against dissident groups by blocking lawful money transfer. As more countries explore CBDCs, their risks and rewards continue to be debated by governments and the people they serve.