In late August, the Central Bank of Nigeria announced their partnership with a Barbados-based fintech company that will help create Nigeria’s first digital currency, the e-Naira. The innovative news was greeted with loads of expectations amidst controversies.
Since then, Nigerians have anticipated its launch on October 1 as announced. But unfortunately, the unveiling of the digital currency was halted and postponed to a later date to ‘enable Nigerians to celebrate the independence anniversary.’
Till the time of this writing, the CBN is yet to release a circular on when it will be finally launched.
Today’s conversation borders on the prospects and possible challenges of floating a digital currency in Nigeria, taking a cue from the recent onboarding of the eNaira by the CBN with Senator Iyere Ihenyen.
Senator Ihenyen is the Lead Partner at Infusion Lawyers where he heads the Blockchain & Virtual Assets Practice and the Intellectual Property & Technology Practice of the virtual law firm. He advises both local and global companies in various areas of law, including blockchain & virtual assets.
A lawyer with an interest in policy and regulations, Senator is the President of Stakeholders in Blockchain Technology Association of Nigeria (SiBAN). He is also the current General Secretary of the Blockchain Industry Coordinating Committee of Nigeria (BICCoN) and the Secretary of the Fintech Industry Coordinating Team (FACT).
He is the exclusive contributor (Nigeria chapter) to the International Guide to Blockchain 2020 and the Lead Trainer, Blockchain for Lawyers 101.
A contributor (Nigeria Chapter) to the International Comparative Legal Guide to Data Protection 2019, Senator also advises on data protection and privacy. Senator has been the author of the Data Protection Overview for Nigeria on DataGuidance by OneTrust since 2016.
Senator is currently the 1st Vice Chairman, Intellectual Property Committee and member of the Information Technology Committee of the NBA Section on Business Law (SBL).
LagosPost: What came into your mind when Nigeria’s Apex bank made the announcement that it was going to partner with Bitt Inc. to float Nigeria’s digital currency, the eNaira, do you see this as a necessary step to achieving financial inclusion in Africa?
Senator Ihenyen: Firstly, the first time I got to know about the CBN trying to float the eNaira was sometime in July this year at a stakeholders’ meeting with the CBN Technical Working Committee on the CBDC. What came to my mind at the time were a number of questions: Why does the CBN want to launch a CBN digital currency at this time? Is there a real need for the eNaira or could it be CBN’s reaction to the growing adoption of cryptocurrencies such as Bitcoin, Ethereum, and others by Nigerians? Is the eNaira the apex bank’s defensive mechanism to save the Naira by shifting focus from cryptocurrencies to the eNaira as the preferred digital currency? Is the Nigerian financial system and the economy ready for the eNaira, especially against the backdrop of the devaluation/depreciation of the Naira?
Secondly, aside from these questions, I had concerns around issues bordering on cybersecurity and privacy. Thirdly, I imagined that if the CBN had been proactive about blockchain technology adoption and its various applications across industries when it had the golden opportunity to, CBN would have probably had a number of solid Nigeria blockchain-development companies to choose from rather than having to partner with Bitt Inc or some other foreign blockchain company.
Sincerely, till date, I am not sure I have found answers to some of these questions and issues.
LagosPost: Do you think that the Central Bank of Nigeria followed all due procedure to the creation of the eNaira?
Senator Ihenyen: While I commend the CBN for its eNaira innovation and the rigorous procedure I imagine the CBN must have followed in the creation of the eNaira, one major aspect I think the CBN could have done better with is stakeholders as well as public engagement, particularly public engagement. Being the potential adopter’s target users of the eNaira, I expected more public engagement before now. Most members of the public were not aware of the CBN’s activities as far as the central bank digital currency (CBDC).
Until about 60 days to the original launch date of 1 October, the public interface part was almost nonexistent. And seeing how eventually CBN missed its own launch date, it tends to confirm the fears a number of stakeholders had about whether CBN had followed all due process leading to the announcement of the adoption of eNaira by Nigeria.
LagosPost: Do you think the CBN decision to partner with Barbados-based Bitt Inc., in launching the digital wallet was the right choice?
Senator Ihenyen: Well, first of all, it is the CBN we are talking about here. And I expect that the Central Bank of Nigeria—as I imagined—would have done the necessary checks when it comes to identifying the right partner, especially regarding technological services or such critical and sensitive assignments as the eNaira. So I would like to imagine that CBN already did its homework in terms of researching the best technology service provider for the job.
That said, I must say that some of us are disappointed with the fact that a local technology or blockchain company didn’t get the job. While not blaming the CBN for going with a foreign technology partner, I am aware that the CBN itself had the golden opportunity to have ensured that the local technology and blockchain technology service providers were finely equipped to handle such projects. How do I mean?
Sometime in 2016, the CBN had the opportunity of engaging players in the nascent blockchain and crypto sector in Nigeria. Blockchain technology & crypto adoption was only just emerging at the time. The CBN told stakeholders at that meeting that it found blockchain technology to be an amazing technology that had the potential of empowering the Nigerian economy if innovatively adopted across industries. So the CBN representative expressed CBN’s plan to set up a committee that would ensure that CBN leveraged the underlying blockchain technology to open up Nigeria’s digital economy across various industries and sectors. That never happened.
I imagine that if the CBN had taken the right decision by coming up with a policy that would position Nigeria to leverage blockchain technology five years ago, by now the blockchain industry in Nigeria would have been able to grow and accumulate superior capabilities. And consequently, Nigeria would have many Bitt Incs that the CBN could confidently pick from locally. So my disappointment is the opportunity CBN missed to empower the local blockchain industry. The CBN would have been able to enable a blockchain technology economy in Nigeria where we would have been able to provide local service providers who are even better than Bitts, but we missed it. Sadly, the orientation, culture, and questionable policy direction that resulted in CBN missing that golden opportunity have hardly changed to date.
Why did we miss the opportunity? Because the Central Bank of Nigeria, as well as all the regulators in that sector, continue to stifle innovation it doesn’t understand. As far as most banks are concerned, crypto is all about fraud, terrorism, speculative investments, etc. No one seems to be looking at the strengths and opportunities that the underlying blockchain technology as well as its applications, including crypto innovations, provide in a financial system that badly needs to either innovate or die.
LagosPost: Taking a cue from the things you’ve said, I want to ask you again, are you undermining the capacity of Bitts Inc?
Senator Ihenyen: No. Not at all. I have my respect for any technology service provider, especially in an emerging area like blockchain and crypto. The blockchain space is not an area that we have seen a lot of traditional or conventional technology providers. So I’m happy to see that there are companies like Bitts who have the capacity to float central bank digital currency solutions. I do not undermine Bitt’s competence. I also do not undermine the competence of the CBN in choosing Bitts as its own technology partner. What I have pointed out and emphasized is that Nigeria had the opportunity to produce more than 30 Bitts locally.
If the CBN had been more visionary and proactive about blockchain and crypto technology innovation in Nigeria, rather than always being suspicious and predatory about it, Nigeria would have been better equipped. We would be building CBDC solutions and other blockchain-powered solutions across the world, including Bitt’s own country.
LagosPost: Reports have it that the countries that have successfully launched a digital currency are few. And It is surprising that economically stable countries like the US, UK, are yet to launch their digital currencies. My question is, do you think Nigeria is taking the right step in the right direction?
Senator Ihenyen: Since the announced launch date of October 1 till now, we have not heard anything from the CBN as regards the eNaira. And like you said, for countries like the UK and the US, I know them to be are better prepared compared to Nigeria, especially the UK. But Nigeria has gone ahead of them to adopt the eNaira.
Yes, it is true that it is only for the pilot scheme which was supposed to be for October 1. But even before the pilot scheme was announced, I expected that certain processes should have been put in place before the public launch of the pilot scheme. I think that there’s something not right about the entire process. And I’ll tell you why. This is not the first time that the idea of central bank digital currency has come up. There are countries that have been way ahead of Nigeria when it comes to researching the good, the bad, and the ugly of such digital currency. So Nigeria is not one of the first countries that came up with this. There are other countries that have been looking at this for more than six, seven years.
The question then is why is Nigeria in a hurry? Well, this is what I think. I think that when you consider that the Nigerian central bank has been researching central bank digital currency as far back as 2017, we cannot say that it has rushed the process. Four years is not a short time in determining whether you want to adopt CBDC or not. This is the process that is expected of any economy that wants to launch its CBDC. But in the case of Nigeria, there was no initial or adequate public engagement on CBDC adoption.
So I think what the Central Bank failed to do is to communicate to Nigerians their thoughts about the possible adoption of CBDC in Nigeria. This should be by way of publicly available research works, thought leadership, engagements with all government parastatals and agencies including law enforcement and relevant regulators, stakeholder engagements, media engagement, and public engagements. This should have been happening since 2017 when CBN started researching CBDCs, not a few months before the pilot scheme.
LagosPost: If you were the CBN governor, what innovation do you think the Nigerian financial industry needs?
Senator Ihenyen: There is one innovation I know that the industry needs and that innovation is trust. And it might be the biggest innovation ever created by the central bank or other regulators in this country. The trust in the system and the economy is waning daily. And the steps taken by the CBN are clearly not boosting trust in any way. Rather, they may be worsening the situation. A number of the moves that the CBN make are usually reactionary, thus further chipping away the little trust left in the system and the economy. We need to go back to the drawing board and see how we can rebuild trust from scratch. I say from scratch because the problem of trust presently is that bad.
The question then is, how do you build trust? Firstly, we have to be more transparent with our processes. Secondly, when it comes to boosting the economy, you need to also have a process that that is adaptive as well. It is true that new technologies can be overwhelming, especially blockchain and crypto. But there is what you call adaptive innovation. Adaptive means that while you may not have all the answers to questions or all the solutions to regulatory issues because things change fast in the technology industry you must not be caught dipping your head in the sand as ostriches do, with the hope that your worst fears will go away soon. They will not. You must be able to adapt; you must be agile. We need to be more innovative and inclusive in our approach.
And one more thing—and this might be a threat to the CBN as a statutory entity itself. We need to start considering very seriously whether we do not need to break the CBN into two separate bodies. I say this with all sense of responsibility as a citizen. The CBN may need to be broken into two bodies for Nigeria to breathe again. On the one hand, we need a body that would be solely in charge of regulating the financial industry sector. And on the other hand, we need a body that takes care of the reserve and focuses on monetary policies. I believe such reform will help improve accountability, credibility, fairness, inclusiveness, and transparency. Without trust and confidence in the system, eNaira will fail.
LagosPost: So what do you think about the leadership of Emefiele as it concerns CBN’s monetary and fiscal policies?
Senator Ihenyen: I think that there are some things that necessarily should have to happen in Nigeria if we really want to make progress. I mean, it is not news that the Nigerian economy has been struggling, ranging from inflation to insecurity, depreciation and devaluation of the Naira to unemployment. Now, I think that one of the missing links when it comes to the Nigerian financial and economic system today is trust.
And it is a shock to me that I do not see the CBN and other financial service regulators in the country giving comprehensive, deserving, and urgent attention to this issue. You cannot run any economy in the world, especially and specifically a financial system, without trust. Trust is the currency of the world, especially today’s economy.
Why are we having the constant issue of FOREX in Nigeria? Why are we having the issue of lack of adequate remittances coming to Nigeria? Why are foreign investors—and these days local investors as well—preferring other climes but Nigeria? In my opinion, it is the growing distrust that both Nigerians and foreigners have in the Nigerian financial system that has led to a lot of the issues we experience today with no seeming solution.
People are losing trust in the system. And that distrust is growing daily. So I expect that the CBN governor will be able to take certain steps that will re-engage stakeholders and members of the public; that will renew people’s trust in the Nigerian economy. Until we do that and address fundamentals, all that we do would effectively amount to window dressing.
When Goodluck Jonathan was in power. I remember the dollar was placed at 169, today. Today, we are talking about almost 600 Naira to $1. And this is regardless of all of the moves that the central bank has been making particularly under Governor Emefiele. Do we need a soothsayer to be told that we are getting things wrong? We don’t need a soothsayer to tell us that we need serious financial and economic reforms. Before it gets too late, let’s stop dressing wounds while the badly wounded skin decay underneath. We need to go back to fundamental reforms. I am certain we can find lasting solutions, together, not some 5 Naira airdrop.
The Vice President of this country, Prof Osinbajo, who is also the chairman of the National Economic Council, has advised the central bank on ways to go about this. I know that the central bank is independent when it comes to monetary policymaking, but someone needs to listen some more. Someone needs to engage some more. Someone needs to be open some more. Stakeholders care too and all Nigerians have a stake.
We must create renewed confidence in the Nigerian economy. That way, we will be able to attract investors. We will be able to save the Nigerian economy with reasoning, not force. What makes you powerful is not by the show of the power that you wield when you ban stuff, launch clampdowns, or freeze accounts but by how you learn to unlearn, learn to be inclusive, and learn to listen despite your power.
LagosPost: Thank you for your time.