E-Naira and Its Implications on the Fintech Sector
Chapter One
Objective of the study
The broad objective of this study is to examine the implication of e-naira on financial technology sector. Specifically, the study seeks to:
- Examine if the launching of e-Naira will widen the scope of the financial services rendered by FinTech Sector.
- Investigate if the launching of e-Naira will enhance the profitability of FinTech companies.
- Determine if the public acceptance of e-Naira will threaten the survival of FinTech Startups since the e-Naira platform will offer closely related services as they do.
CHAPTER TWO
LITERATURE REVIEW
eNaira
eNaira can be called electronic currency (e-currency) or digital money, or cybercash for Internet transactions. African countries are not left out in adopting e-currency for their citizens to trade/do business locally and internationally. However, some the countries like India, Ghana, South Africa, China, Nigeria, and many more have opted for homegrown e-currency (Abraham, 2021). Through its Central Bank of Nigeria (CBN), the Federal Government of Nigeria has introduced the rollout of its homegrown e-currency called eNaira. The announcement of eNaira came as a surprise to many Nigerians because of the government’s position oncryptocurrency. In February 2021, CBN banned the transaction of cryptocurrencies in Nigeria, citing reasons such as unregulated (uncontrolled), high volatile, susceptible, and discontinuity nature of cryptocurrency and the funding of #EndSars through the use of crypto (Umoru, 2021). Crypto is regarded as a digital currency that facilitates Internet (online) transactions. However, the ban saw traders used alternative means to continue their crypto trading underground (illicit trading) (Abraham, 2021). Countries such as Lesotho, Kuwait, Oman, and Macau have banned cryptocurrencies (Said, 2019). Cryptocurrency is a blockchain currency that facilitates easy payment with a peer-to-peer process. According to Abraham (2021), Nigeria is ranked second behind the United States of America in countries that are trading in cryptocurrency. According to Onukwue (2021), the introduction of eNaira by CBN aimed to discourage cryptocurrency dominance among the youth. However, many Nigerians are wondering about the difference between eNaira and other cryptocurrencies, and many are asking:
- Is Nigeria launching eNaira as a cryptocurrency? No. According to Abiodun (2021), CBN is not offering cryptocurrency through eNaira. They are not the same.
- Will Nigeria lift the ban on crypto trading The introduction of eNaira is not an indication to lift the ban on cryptocurrency in the country.
- Will the launch of eNaira replace the traditional Naira notes? No, both will be operated together to facilitate transactions. However, eNaira is the digital version of Naira.
- How secured will eNaira be? At this point, the security details are not precise. But security remains the talking point of all digital currencies.
- What is the importance of eNaira? According to Olisah (2021) and Abiodun (2021), eNaira will provide and facilitate a cross-border transaction,improve “financialinclusion,monetarypolicyeffectiveness, improved payment efficiency, revenue tax collection, remittance improvement, and targeted social interventions”. These questions and many more beg for additional answers as eNaira continues to operate. Against the questions (confusions) mentioned above. The Nigerian and business community does not understand the challenges and opportunities that come with eNaira. This paper aims to provide a comprehensive understanding of eNaira, the opportunities and challenges for Nigerians and businesses
The operations and characterization of eNaira
Every digital or electronic currency (eNaira) presents opportunities and challenges for traders, especially the informal sectors. eNaira is a digital currency equivalent to fiat Naira (physical or printed Naira notes). Again, eNaira is Naira in a digital form that can only be used on the Internet, without physical notes. eNaira is issued by CBN through the backing of the Federal Government of Nigeria. According to Timi-Koleolu and Aroh (2021), customers (Nigerians) can purchase eNaira through Financial Institutions (FI) and transfer to their ewallets (eNaira Speed Wallet) account. It means that FI can convert normal money in the customer’s bank account into an eNaira wallet, allowing customers to make online transactions easier for individuals and entrepreneurs. Most entrepreneurs in Nigeria are in the informal (unstructured) economy sector, which made cryptocurrency thrive because crypto is unregulated (unstructured). In the same vein, the eNaira can succeed amongst the informal sector if the implementation is unstructured. According to Adiodun (2021) and Olisah (2021), eNaira has some great objectives: increasing financial inclusion, improving revenue and tax collection, improving payment efficiency, improving social interventions, and many others. These objectives are untested in reality. However, CBN, tackling different challenges presented below (eNaira challenges) is key in the implementation and operation of eNaira. Though eNaira will operate like the traditional Naira notes, the value and supported by Naira (Abiodun, 2021). Moreover, the eNaira wallet will be operated in four tiers (Timi-Koleolu & Aroh, 2021; eNaira, n.d):
Tier 0 (Zero) – Customers without any bank account and no verified National Identification Number (NIN), the transaction will be N20,000 (limit in transfer) and N120,000 (balance limit).
Tier 1 (One) – Customers without any bank account, the transaction will be N300,000 (balance limit) and N50,000 (limit in transfer). The requirements are for customers without bank account need but a phone number and verified National Identification Number (NIN) (Know Your Customer (KYC) requirement).
Tier 2 (Two) – Customers within minimum spending, the transaction will be N500,000 (balance limit), N200,000 (limit in transfer) and bank account, phone number, and Bank Verification Number (BVN) (KYC requirement) required.
Tier 3 (Three) – Regular spending customers, the transaction will be N5,000,000 (balance limit), N1,000,000 (limit in transfer), and BVN and bank account (KYC requirement) required. However, a Merchant account holder will have no limit (balance limit), but N1,000,000 (limit in transfer), and anti-money laundering, all KYC requirements, and CBN counterfeit terrorism regulation (KYC requirement).
CHAPTER THREE
RESEARCH METHODOLOGY
INTRODUCTION
In this chapter, we described the research procedure for this study. A research methodology is a research process adopted or employed to systematically and scientifically present the results of a study to the research audience viz. a vis, the study beneficiaries.
RESEARCH DESIGN
Research designs are perceived to be an overall strategy adopted by the researcher whereby different components of the study are integrated in a logical manner to effectively address a research problem. In this study, the researcher employed the survey research design. This is due to the nature of the study whereby the opinion and views of people are sampled. According to Singleton & Straits, (2009), Survey research can use quantitative research strategies (e.g., using questionnaires with numerically rated items), qualitative research strategies (e.g., using open-ended questions), or both strategies (i.e., mixed methods). As it is often used to describe and explore human behaviour, surveys are therefore frequently used in social and psychological research.
POPULATION OF THE STUDY
According to Udoyen (2019), a study population is a group of elements or individuals as the case may be, who share similar characteristics. These similar features can include location, gender, age, sex or specific interest. The emphasis on study population is that it constitute of individuals or elements that are homogeneous in description.
This study was carried to examine an e-naira and its implications on the fintech sector. Flutterwave in Lagos state Selected Residents of in Uyo form the population of the study.
CHAPTER FOUR
DATA PRESENTATION AND ANALYSIS
INTRODUCTION
This chapter presents the analysis of data derived through the questionnaire and key informant interview administered on the respondents in the study area. The analysis and interpretation were derived from the findings of the study. The data analysis depicts the simple frequency and percentage of the respondents as well as interpretation of the information gathered. A total of eighty (80) questionnaires were administered to respondents of which only seventy-seven (77) were returned and validated. This was due to irregular, incomplete and inappropriate responses to some questionnaire. For this study a total of 77 was validated for the analysis.\
CHAPTER FIVE
SUMMARY, CONCLUSION AND RECOMMENDATION
Introduction
It is important to ascertain that the objective of this study was to ascertain an e-naira and its implications on the fintech sector. In the preceding chapter, the relevant data collected for this study were presented, critically analyzed and appropriate interpretation given. In this chapter, certain recommendations made which in the opinion of the researcher will be of benefits in addressing the challenges of the an e-naira and its implications on the fintech sector
Summary
This study was on an e-naira and its implications on the fintech sector. Four objectives were raised which included; Examine if the launching of e-Naira will widen the scope of the financial services rendered by FinTech Sector, investigate if the launching of e-Naira will enhance the profitability of FinTech companies and determine if the public acceptance of e-Naira will threaten the survival of FinTech Startups since the e-Naira platform will offer closely related services as they do. A total of 77 responses were received and validated from the enrolled participants where all respondents were drawn from flutterwave in Lagos State. Hypothesis was tested using Chi-Square statistical tool (SPSS).
Conclusion
All that said, we really have little idea where this will lead. A decade since the appearance of Nakamoto’s (2008) paper that launched Bitcoin, we have more than 1,000 cryptoclones. But where are the broader applications of the blockchain technology? We expect that it will find increased use in the clearing, payments, and settlement system (Cecchetti and Schoenholtz 2017a). Perhaps it also will be applied across a range of other activities, such as recording property titles or managing the supply chain both within and across firms or for a variety of accounting and audit functions. Such applications would likely focus on cases with limited numbers of transactions and where speed is less important. But, for now, we anticipate the development and implementation of proprietary systems, not those with open access.
Recommendation
The success of eNaira lies in the elimination of the challenges mentioned above and other emerging ones.
The CBN should work with FinTechs in Nigeria and other grassroots agents to drive this eNaira initiative to the people.
The CBN should be flexible in formulating and regulating eNaira and willing to adapt to change in the future.
References
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