IMF Says CBN’s eNaira Have Unknown Consequences

The Managing Director of the International Monetary Fund (IMF), Kristalina Georgieva, has warned that the eNaira and other retail Central Bank Digital Currencies (CBDC) have unknown consequences.

CBDC is a government-controlled digital currency that is split into two types; retail and wholesale CBDC. The retail CBDC is used by individuals for transactions and the wholesale CBDC is used by banks and other financial institutions.

In Nigeria, while cryptocurrency transaction is banned by the Central Bank of Nigeria (CBN), the country has Central Bank Digital Currencies, which is eNaira, a retail CBDC. 

As of March 31, 2023, e-Naira transactions are estimated at about N1.4 million by the central bank, despite the CBN issuing N200 million eNaira, out of the N500 million minted, to financial institutions for the over 2,000 customers that were on-boarded as of the time of the launch on October 25, 2021. 

About 33 banks have been integrated into the eNaira network, according to the CBN, with the eNaira consumer wallet recording 583,000 downloads and the merchant wallet recording 83,000 downloads from over 160 countries. 

Director of Policy at CBN, Hassan Mahmoud, had stated on Tuesday, 2 May, that: “Since its launch, the CBN has continued to modify its features to make it more accessible to a wide range of users. 

“Today, one does not need a smartphone to use the eNaira as it has become compatible with all generations of mobile devices (old and new). Till date, over N1.4m transactions have passed through the eNaira platform.” 

While the CBN is pushing for the high adoption of eNaira among Nigerians for retail transactions, IMF’s Georgieva has called for caution towards the usage of CBDC for retail transactions. 

She said wholesale CBDC has little space for undesirable shocks, but the central banks across the world might not be prepared for the ripple effect that will result from retail CBDC’s complete transformation of the financial system.  

“We think that wholesale CBDCs can be put in place with fairly little space for undesirable surprises, whereas retail CBDCs completely transform the financial system in a way that we don’t quite know what consequences it could bring,” Georgieva said in an interview at the Milken Institute’s 2023 Global Conference, on Monday, 1 May.