AN EVALUATION OF THE POSSIBLE CHALLENGES IN THE USE OF ENAIRA PLATFORM

CHAPTER ONE

INTRODUCTION

1.1 Background Of The Study

Considering the rapid technological advancement and financial market evolution, a lot of innovative transactional products have emerged in recent years. According to McKarles (2019), the global financial system has clearly embraced the contemporary transition from physical currency to nearly digital currencies via the medium of technology. Despite the existence of commercial banks, the need for the introduction of digital currency was hatched in order to evolve with the wind of a cashless economy and money circulation (Moories 2015).

Any currency, money, or money-like asset that is largely handled, stored, or exchanged via digital networks, notably the internet, is referred to as digital currency (digital money, electronic money, or electronic currency) Cryptocurrency, virtual currency, and central bank digital currency are all instances of digital currencies. Digital currency can be saved in a distributed database on the internet, a centralized electronic computer database held by a corporation or bank, digital files, or even a stored-value card (Andolfatto, 2018). Digital currencies have features similar to traditional currencies but, unlike currencies with printed notes or minted coins, they do not have a physical presence. This lack of physical form allows for nearly immediate transactions through the internet and avoids the cost of distributing notes and coins. In the light of the evolution of digital currencies, there has been a lot of favorable conversation on the relevance of digital currencies to the economic fiscal system of countries.

However, following the apex bank's ban on digital currencies, specifically cryptocurrencies in Nigeria, which appeared unprofessional and inhumane to citizens and business operators, as the ban threatened the survival of multiple business entities and resulted in the loss of a source of income for many unemployed and employed citizens of the country, and the growing use of the digital currency dispensation, several governments around the world, including Nigeria, have shown interest in the operations of digital currencies, with the CBDC option emerging as the preferred starting point for Nigeria (Nwoke, (2021). (2021).

In light of this, the CBN launched eNaira, a digital currency platform. Nigeria's digital currency (eNaira), is legal currency, much like the Naira, and it must be recognized as a mode of payment in the country as well. According to Dailypost (2021), the e-Naira would act as a wallet against which users could store existing monies in their bank accounts, and that the currency would expedite financial inclusion by allowing for cheaper and faster remittance inflows.

On the contrary, Adekunle (2021) emphasized the possible challenges which may hamper the effectiveness of the eNaira platform, thereby disrupting the aim for which it was created. He drew his points from the experience of banking digital services. Among these challenges include the illiteracy rate of un-banked Nigerians, mostly in rural areas, poor internet facilities which disrupt transactions, epileptic power supply, etc. Having analyzed the promised beneficial features of eNaira and the possible factors which may hamper its functionality, this study is therefore set to meticulously and investigatively determine the challenges which may mitigate the use of the eNaira platform among Nigerians and other subscribers.

1.2 Statement Of The Problem

The major advantage of a cashless economy has to do with the physical economy itself. Retail Banking Research indicated that the expense of storing physical currency is quite high. However, by transitioning to digital currency, it will be feasible to decrease this cost (UNB 2021). Moving to a digital platform for a transaction not only decreases the handling cost but also becomes easier to trace the money (UNB 2021).

Additionally, the cash-based monetary system has always been subject to corruption and unlawful advantages and the situation is no different in Nigeria. The major way of money laundering is cash, as the tracking method is likewise old. In hindsight, digital currency delivers greater security and has better economic benefits for individuals, businesses, and the government (UNB 2021).

In light of this, countries like China have successfully developed a government-regulated digital currency to facilitate economic growth and advancement. Likewise, the Central Bank of Nigeria (CBN) has launched the eNaira digital currency. This was after instructing banks to close cryptocurrency and ban crypto-related accounts in February 2021 (Nwoke, 2021). The e-Naira will serve as a digital representative of the paper Naira currency. According to Ayomide (2021), the platform will be a complementary legal tender in Nigeria, have the same exchange value as the Naira, and maintain a "parity of value" with the Naira. Furthermore, the eNaira platform as a digital currency was not only set up to reduce the handling cost of Naira notes and effective tracing of money laundering, but to benefit individuals and business organizations in the smooth running of daily transactions, performing cross-border transactions, foreign investments, gaining direct government aid, etc. (Nwoke, 2021). Much more, the platform facilities, fast, safe, easy, and reliable means for transactions. Regardless of the aforementioned benefits of the eNaira platform, there appear to be some significant bottlenecks which may hinder its utilization and effectiveness. According to Adeoti (2021), the efficient use of eNaira, as well as other internet-based banking services in Nigeria, will undoubtedly be hampered by issues such as unreliable networks, power outages, and security of communication over transaction network. Additionally, Adekunle (2021) emphasized the possible challenges which may hamper the effectiveness of the eNaira platform, thereby disrupting the aim for which it was created. He drew his points from the experience of banking digital services. Among these challenges include the illiteracy rate of un-banked Nigerians, mostly in rural areas, poor internet facilities which disrupt transactions, epileptic power supply, etc. In view of the above, this study will critically evaluate the possible challenges in the use of eNaira.

1.3 Objective Of The Study

The general aim of this study is to critically evaluate the possible challenges in the use of eNaira. Specifically, the study is set to:

1.        Investigate the benefits of the eNaira platform.

2.        Determine if the level of infrastructural  development in  rural societies in Nigeria will affect the effective use of eNaira.

3.        Identify the predictable factors which will affect the utilization of eNaira in Nigeria.

4.        Determine if those challenges can thwart the objective of the creation of the eNaira.

1.4 Research Question

The following questions will guide this study:

1.        What are the benefits of the eNaira platform for Nigerians?

2.        Will the level of infrastructural  development in  rural societies affect the effective use of eNaira?

3.        What are the predictable factors which can affect the utilization of eNaira in Nigeria?

4.        Can those challenges thwart the objective of the creation of the eNaira?

1.5 Significance Of The Study

This study will be useful to CBN officials, students, and researcher.

To CBN officials, this study will enlighten them on the possibly unforeseen challenges which may hamper the effective use of eNaira in Nigeria. This is justified by the fact that the study will reveal whether the level of infrastructural development in rural societies in Nigeria will affect the effective use of eNaira. and the predictable factors which will affect the utilization of eNaira in Nigeria, as well as determining if those challenges can thwart the objective of the creation of eNaira.

For students and researchers, this study will serve as a source of information for them when conducting research on related topics.

1.6 Scope Of The Study

The study is focused on evaluating the possible challenges in the use of the eNaira platform. The study will precisely investigate the benefits of the eNaira platform, determine if the level of infrastructural development in rural societies in Nigeria will affect the effective use of eNaira, identify the predictable factors which will affect the utilization of eNaira in Nigeria, and determine if those challenges can thwart the objective of the creation of eNaira.

The study will be delimited to Enugu Urban, Enugu State, Nigeria.

1.7 Limitation of the study

Like in every human endeavour, the researchers encountered slight constraints while carrying out the study. Insufficient funds tend to impede the efficiency of the researcher in sourcing for the relevant materials, literature, or information and in the process of data collection, which is why the researcher resorted to a limited choice of sample size. More so, the researcher will simultaneously engage in this study with other academic work. As a result, the amount of time spent on research will be reduced.

1.8  Definition of Terms

E-Naira: eNaira is a central bank digital currency (CBDC) issued by the Central Bank of Nigeria as a legal tender. It is the digital form of the Naira and will be used just like cash.

Digital currency: Digital money (or digital currency) refers to any means of payment that exists in a purely electronic form. Digital money is not physically tangible like a dollar bill or a coin. It is accounted for and transferred using online systems.

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