CBN clarifies that eNaira is not a threat to financial stability

The Central Bank of Nigeria (CBN) has issued a statement to clear the air on the impact of its Central Bank Digital Currency (CBDC), the eNaira, on the country’s financial stability. The statement, released on October 9, 2023, by the CBN’s Director of Corporate Communications, Isa AbdulMumin, PhD, was in response to some media reports that suggested that the eNaira could pose a risk to the nation’s financial system.

According to AbdulMumin, the media reports were based on a “lack of understanding” of portions of the foreword and some articles in the bank’s recently released book titled “Economics of Digital Currencies: A Book of Readings.” He explained that the book provides an in-depth understanding of CBDCs generally and the workings of the eNaira in particular, highlighting issues and challenges in implementation and adoption.

He said that one of the media reports spoke of “concerns about Nigeria’s central bank digital currency, eNaira, indicating potential risks to financial stability despite its success in narrowing the country’s financial inclusion gap.” He described the nexus implied as “unconvincing” and said that the CBN does not usually join issues in news commentary but felt compelled to clarify the reports to avoid misunderstandings.

AbdulMumin stated that the eNaira is designed to improve financial inclusion and reduce the risk of speculative investments in cryptocurrencies. He said that the eNaira structure continues to evolve and undergo modifications targeted at improving the user experience across all interfaces. He urged Nigerians to embrace the technology for greater financial inclusion.

The CBN’s statement comes amid concerns from some financial experts that the eNaira could lead to financial instability due to the conversion of bank deposits into eNaira. Reports have it that the stability risks arise from the fact that funds converted by customers into eNaira are held within wallets domiciled with the CBN, rendering them unavailable for lending activities by commercial banks.

The CBN launched the eNaira on October 1, 2023, as part of its efforts to promote digital transformation and enhance cross-border payments. The eNaira is a legal tender and can be used for transactions within and outside Nigeria. The CBN has assured Nigerians that the eNaira is safe, secure, and convenient.