The launch of Africa’s first digital currency, eNaira, has cast some doubt of hope on West Africa’s single currency.
According to the Economic Community of West African States, the introduction of the Eco, a new currency for the entire area, would help remove trade and monetary barriers, promote economic activity, and enhance living standards in the community of 385 million people (ECOWAS).
In West Africa’s 15 countries, seven currencies are now in use, with CFA francs being used by eight largely French-speaking countries.
The countries that remain have their own currencies, none of which are readily convertible. Following several postponements (in 2005, 2010, and 2014) following its creation in 2003, a realistic date for the Eco’s debut was set for January 2020, but it never transpired, as expected.
Meanwhile, the Central Bank of Nigeria (CBN) announced Africa’s first Central Bank Digital Currency (CBDC) in October, generating widespread national and international interest in how effectively the electronic currency will work and what problems it will answer in the banking and finance sectors.
In just over a month after activation, eNaira was used to complete 37,810 transactions, increasing the total amount of transactions to almost N208.91 million. The supply of eNaira in circulation as of November 29, 2021, was N62.46 million.
After initial delays owing to the country’s independence anniversary celebrations, the eNaira became live on October 25, 2021. Both merchant and consumer wallets went live on the same day, although consumer wallets have been activated in greater numbers than merchant wallets.
The CBN, Payment Service Banks (PSBs), and other financial institutions forecast higher uptake in 2022, with over 500,000 downloads in the first month and 114,900 active wallets trading over the platform.
What experts are saying about CBDC vs Eco
Although eNaira adoption remains uncertain, there is hope for increased engagement and eNaira’s growth. Nairametics spoke with some experts on how the eNaira will affect West Africa’s single currency dream.
The country has invested a lot of time and resources on the eNaira, according to Nkwodimmah Pascal, Financial Manager for Opera and a scholar. “I believe a lot of work and money has gone into improving the eNaira, so any suggestion of another currency may be perceived as a threat to the eNaira,” he said.
He stated that the launch of eNaira did not add the adoption of Africa single currency. He said, “eNaira provides an alternative for Africa’s single currency since it permits cross border payment.”
The CBN would desire eNaira to be accepted by Africans, according to Oluwadamilola Ogunwale, Research Analyst at Edgefield Capital Management Limited. “Every country would like that their currency is embraced by the continent, and Nigeria, as the first country to have a digital currency, would want their scheme to succeed,” she said.
“Hence, the launch of eNaira can technically be seen as a setback to single African currency as Nigeria would have a vested interest in promoting the eNaira rather than a substitute. Also, the eNaira is more realistic in the Africa current economy the project seems a long way from fruition.”
Akeem Akorede, ALM Analyst at Coronation Merchant Bank stated that the Eco which is the single currency agreed to be adopted by 15 West African countries has suffered delay due to differences in level of economic development and macroeconomic indicators. He said, “ Most of the countries are yet to meet the current criteria, especially achieving inflation band of less than 10%, with Nigeria one of the giant in the union yet to achieve this target.
Akorede also stated that the development of CBDC in Ghana and Nigeria may be seen as a setback to the Eco. He said, “The digital currency recently launched by the Central Bank of Nigeria and her Ghana counterpart may signal a setback towards the realization of the single currency for the region. The control of the digital currency relies on the country’s monetary policy authority, which is against the harmonisation plans of the ECOWAS monetary Union.”
In today’s worldwide monetary environment, an ECOWAS single currency will allow West African countries to combine their monetary resources to accomplish their shared and individual goals. In truth, the ECOWAS member countries face major externally generated monetary issues that no single country can handle.