There is a massive promise on the ascension of a digital currency, e-naira, in Nigeria. But e-Naira can also crack Nigeria’s economy. I have a 25 document which I have been creating on E-Naira as I continue to evaluate the opportunities and risk. The fact is this: if E-Naira launches, expect everyone to move his or her money from retail banks to CBN (Central Bank of Nigeria) – and if that is the case, retail banks will have limited money to lend, freezing banking as we know it.
Magically, if people cannot borrow from banks because the money is in the CBN vault, the economy will crash as we cannot have growth. I do expect the CBN to cap how much people can keep in e-Naira; otherwise, our economy will fold.
Already, my model is that up to 10% of Naira will be in e-wallets by 2025 and with that, retail bank-driven CBN pushed monetary policy will not “affect” 10% of naira. In other words, if monetary policies are designed around control via retail banks and money is warehoused in Pass, Flutterwave, Paystack, expect dislocations.
I am waiting for the CBN technical document on the digital currency. Depending on what they have there and the apparatus it wants to run the show, we will know what the future holds. But one thing is certain: if you disintermediate retail banks through e-Naira, you will destroy Nigerian economy overnight because companies cannot source funds for growth. You cannot expect the citizens to hold money directly with the apex bank and still expect the retail banks to still have money to lend!
Of course, from ease of use, no issues of failed banks to deal with, zero or extremely low transaction costs, to ability to engage citizens directly on monetary policies via many tools like interest rates, e-naira will be a positive.
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