BY Adefolarin A. Olamilekan
(Political Economist and Development Researcher)
The Central Bank of Nigeria (CBN) is gearing up for launch of the eNaira. Whether Nigerians are ready for the e-naira, and not doubting its technological efficacy is another question. The Central Bank of Nigeria in a recent statement said, “the CBN digital currency is not what every country has implemented. We are blazing the trail in Africa. Nigeria is the only country in Africa that is doing it. And so many advanced countries are not doing it,”
It added, “Today, anywhere you present naira to pay, compulsorily it must be accepted because that is our fiat currency, in the same way naira is accepted that you can’t reject it, is the same way e-naira must be accepted”. In addition, the apex bank said “similar to the fiat currency (naira), the CBN bears all liabilities for the eNaira. The liability of the enaira money is directly on CBN, which is similar to the cash we hold. The liability of the cash we hold today rests with the CBN. So, it gives Nigerians the opportunity to bank with CBN,”
On its benefits, the CBN said eNaira would save the cost of printing new naira notes as the “minting of e-naira is electronic and charges of transferring funds would be lower for those using the enaira”. Interestingly, eNaira according to CBN is going to be a “game changer that would provide an alternative payment system and would radically transform the payment landscape”.
The CBN could be right on the issues of cost of printing fiat naira notes. Over the years there have been concerns about unwieldy portability, the acrimony associated with shortage of change for small transactions, the inflationary push associated with product pricing, the rapid deterioration of both paper and polymer notes. These are genuine. However, far from the above reasons, the worries, about fiat naira’s purchasing power being affected by double-digit annual inflation rates are equally significant challenges to the current Naira profile.
Some analysts have wondered if it can enhance the value of fiat Naira especially going by current fraught performance of the naira. Regrettably, the travails of our national currency didn’t start today. Its abysmal depreciation dates back to 1986 with the introduction of Second Tier Foreign Exchange Market, structural adjustment policies, our import dependent economy, petrol dollar (mono-cultural economy),structural deficit productive sector lacking the integration of primary, secondary and tertiary agrarian and mining sectors. All these are compounded by lack of visionary leadership that is not bold in action.
To enhance the value of the naira, diversifying our economy to produce more, earning additional export revenue and competition against import substitutes have all been suggested. The creation of eNaira is a welcome development, especially as we witness the current mangers of the nation’s monetary policy take bold and proactive steps.
However, if the root causes of our economy’s double-digit annual inflation rate remain unresolved, the purchasing power of the eNaira would also be rapidly eroded, making our Naira a poor store of value. We understand the monetary policy ideas behind eNaira; our task to bring back fiat naira to a more valuable national currency of pride is more tasking. The constant burden of supply deficit of the dollar, (which must be contained to restrain inflation); demand- supply facilitated by conscious manipulation of speculators and black marketers of undoubtedly creates this scenario.
As a result, the systemic paradox of a weakening Naira despite increasing reserves, ultimately, makes our currency less desirable to hold as a safe store of value. Thus in the last couple of weeks, the apex back has been taking some stringent measures and it is laudable.
The Naira has unexpectedly depreciated as our dollar reserves climbed from less than $4bn in 1996 to over $50bn in recent years. Therefore, the appropriate re-positioning of the current fraught of Naira exchange rate to other currencies is not a task to be left for the CBN alone.
The Nigerian state and her Economic Team should have a short and snappy plan to revamp the economy, progressively. The manner our economic diversification policy is being engaged is not achieving the needed result. How come crude oil still accounts for 90 per cent of the total export despite abundance of mineral resources, cash crops and other commodities that are mega earners in other places?
In retrospect, there is no sensible reason and explanation why the Nigerian state cannot launch simultaneous monetary and fiscal policies to redeem the domestic economy. More importantly, the Buhari administration should have more than a passing interest in alleviating sufferings of the Nigerian masses. The critical function of the Central Bank of Nigeria (CBN) crisscrosses regulating interest rate, inflation and foreign exchange.
The Federal Government and its economic team should sit up and get down to brass tracks. There are advantages and positives associated with liberalizing the welfare of the masses. Heightened industrial capacity utilization and expansion would ensure a realistic and stabilized naira exchange rate and drastically check inflation.
As a foremost Nigerian Economist late Henry Boyo would say “I am a proud and patriotic Nigerian and the battle against the dollarization of the economy… is one that is aimed at nairanising it” And this we stand for!