Cryptocurrency is a kind of digital currency that is unregulated by national or international governments and territorial laws. Bitcoin is the world’s foremost cryptocurrency. The founder of Bitcoin, known by what is suspected to be a pseudonym, Satoshi Nakamoto, set forth its principles in a paper released on the 31st of October 2008. The paper states that, in effect, only 21 million “coins” would exist in total, the process would be completely online, “nodes” or highly functional computers would verify that every transaction was authentic and no one was using the same bitcoin twice, and this process would be called mining. You could also buy coin in real currency. This made it even more valuable as an item with a dollar value has real world market value. People could trade on it, like any other currency.
Bitcoin’s value has fluctuated over the decade since that seminal paper by the mysterious Nakamoto. Its real dollar value has made it a seminal event in our new 20s. Elon Musk of Tesla has invested in Bitcoin by the billions. Jack Dorsey of Twitter thinks it will be as disruptive as the internet and eventually replace all currency. It has its detractors too; Warren Buffet has called it a “gamble.” Unregulated money is still unregulated money. At least not regulated by a central or regional bank, or the present system of regulations for subnational and international fiat money transactions. It has led to bubbles within the cryptocurrency ecosystem. Investors and speculators regularly bet on which form of cryptocurrency or digital currency will appreciate or depreciate in value over the next few years.
The Central Bank of Nigeria in 2017 stopped financial institutions licensed by it from keeping accounts that trade in cryptocurrency. It reiterated its position in 2021 forcing some fintech companies to close down Nigerian accounts. In 2021, it also launched its own digital currency, eNaira. It is hoped by the banking regulator that eNaira would help set up an online transaction industry in the digital space with the same value as fiat naira and with the traceable and regulated framework of the latter currency in place.
eNaira could have important ramifications for e-commerce businesses across Nigeria. With internet penetration in this space at 26% (the percentage of internet users who buy from the internet), there is room for growth and the elimination of the third party in digital money transactions (platforms that support online banking or POS transactions). A digital wallet to digital wallet transaction secured by the central bank is positioned to allow for more confidence for digital business operations as the technology takes hold. There are also opportunities in this space for traders, small financial operators, and businesses to be more consumer friendly, have safer and more immediate transactions, and for vendors to deal with digital currency rather than cash, which is always a plus if you trade in high volume transactions in a market setting where carrying cash may be inconvenient or unsafe.
Yet like with all things in the digital space, even Bitcoin itself, the question will be adoption. People have to adopt, adapt, and use the platform to give it real time value. The central bank has tried to encourage adoption by giving 90 days from the 25th of October 2021 for purchase of eNaira free of any transactions costs. Banks have been quick to get onboard, with 33 major banks joining up at time of launch. This will have to expand to traders, buyers, sellers, cashpoints, markets, and supermarkets. Currency derives its value from adoption and use, the demand side of the equation.
Businesses will have to look at the platform and decide what novelty and advantage they can bring to their customers when offering the option of eNaira. It is something to study, watch and apply. The dearth of any business can be a fear of innovation. It can also come from adopting too soon or trying too many things at the same time. We are cautiously optimistic of the long-term adoption of digital currency in Nigeria, and the eNaira will be at the herald of that. There is no need to speculate over the value like with Bitcoin; it is essentially one naira to one eNaira. Yet, It has the potential to change the landscape of everyday commerce in Nigeria.