The Central Bank of Nigeria (CBN)’s efforts to ramp up digital financial services awareness and also ensure widespread adoption of its digital currency (eNaira) by Nigerians are positively impacting the apex bank’s quest to improve on the country’s financial inclusion rate, writes TONY CHUKWUNYEM
When on June 26, 2019, the President, Global Growth and Opportunities of the Bill and Melinda Gates Foundation, Mr. Roger Vorhiles, paid a courtesy call on the Governor of the Central Bank of Nigeria (CBN), Mr. Godwin Emefiele, during which he announced that the Gates foundation had initiated a fresh initiative to close the financial inclusion gap in Africa, Emefiele, in his remarks, noted that the apex bank remained committed to improving financial inclusion in the country as well as maintaining financial system stability.
95% target He also disclosed that he had mandated a shift in the adult financial inclusion target to reach 95 per cent in Nigeria by 2024, stating that CBN was exploring new techniques and policies to drive financial inclusion, some of which included the Licensing and Regulatory Guidelines for Payment Service Banks (PSBs), the Shared Agent Network Expansion Facility and generally providing the conducive regulatory environment for Fintechs to contribute to financial inclusion.
Also, in his address at the 30th Seminar for Finance Correspondents and Business Editors held in Lagos in March 2021, the CBN governor, who was represented by the Deputy Governor in charge of Corporate Services at the apex bank, Mr. Edward Adamu, urged Nigerians to harness the benefits of the underlying crypto technology (blockchain), stressing that while CBN had placed restrictions on cryptocurrency transactions, its “policy stand does not preclude Nigerians from harnessing the benefits of the underlying technology that support crypto transactions, which is a distributed ledger, commonly referred to as blockchain.”
eNaira launch
Thus, given the foregoing, the historic launch of CBN’s digital currency, known as the eNaira, on October 25 last year, may not have come as a complete surprise to industry watchers.
True, it was an epoch-making event as it made Nigeria the first African country and the second in the world to issue a Central Bank Digital Currency (CBDC), but CBN had clearly indicated long before the launch that it was not adverse to using the numerous benefits of the underlying technology that support crypto and digital currency transactions, which is the distributed ledger, also referred to as blockchain.
Indeed, in his speech while launching the eNaira, President Muhammadu Buhari listed the many benefits that the eNaira would bring for the Nigerian economy, including boosting the country’s Gross Domestic Product (GDP) and accelerating financial inclusion. He stated: “Indeed, some estimates indicate that the adoption of CBDC and its underlying technology, called blockchain, can increase Nigeria’s GDP by $29 billion over the next 10 years.
“CBDCs can also help increase remittances, foster cross border trade, improve financial inclusion, make monetary policy more effective, and enable the government to send direct payments to citizens eligible for specific welfare programmes.”
Similarly, giving updates on the eNaira at the eNaira Hackathon grand finale held in Abuja last week, Emefiele highlighted the potential of the digital currency, which, according to him, has recorded total financial transactions amounting to N4 billion and 840,000 downloads since its launch in October last year to improve financial inclusion.
The CBN governor said: “When we launched the eNaira, we promised to increase the level of Financial Inclusion in the country because just like naira, eNaira is expected to be accessible to all Nigerians and would provide more possibilities to bring in the unbanked into the digital economy.
“I am pleased to inform you that by next week, Nigerians, both banked and unbanked, will be able to open an eNaira wallet and conduct transactions by simply dialling *997 from their phones. “Shortly after this, both merchants and consumers with bank accounts can use the NIBSS Instant Payment (NIP) to transfer and receive eNaira to any bank account. This will further deepen the integration of the eNaira with the existing national payment infrastructure.”
Continuing, he said: “The eNaira is expected to enhance financial inclusion, support poverty reduction, enable direct welfare disbursement to citizens, support a resilient payments ecosystem, improve availability and usability of central bank money, facilitate diaspora remittances, reduce the cost of processing cash, and reduce cost and improve efficiency of cross-border payment among others.”
“The eNaira was also developed to provide Nigerians with a cheap, safe and trusted means of payment. Unlike the offline payments’ channels, like agent networks, USSD, wearables, cards and near field communication technology, the eNaira would give access to financial services to underserved and unbanked segments of the population.
Innovative products and services built on the eNaira would enhance Nigerians’ participation in the digital economy and promote further development of a burgeoning Fintech ecosystem. “To achieve these set out objectives, the project adopted a phased- approach with the first phase focusing on banked users, while the policy objective of the second phase borders around financial inclusion.”
Digital financial services awareness
Analysts note that apart from harping on the benefits of the eNaira, the CBN has also in recent weeks been ramping up digital financial services awareness as part of its efforts to boost economic growth.
For instance, on July 8, CBN issued a circular to all deposit money banks (DMBs), Other Financial Institutions (OFIs) and non-bank financial institutions, which was titled: “Exposure draft on the Digital Financial Services (DFS) awareness guidelines.” The apex bank explained that “the country is witnessing exponential increase in the provision and use of digital financial services and products following the advent of COVID-19.
This development has made it imperative to put in place a guideline to address gaps in consumer knowledge and practices with DFS. The broad goal of the guideline is to provide a set of principles and expectations for financial service providers to integrate in the provision of DFS, fair treatment and enhanced consumer understanding in order to ensure positive outcomes.” It also stated that one of the key objectives of the guidelines is to set “digital financial literacy (DFL) standards for digital financial services providers (DFSP).”
Thus, the document stipulated that DFSPs, among other requirements, are expected to “provide information that will enable consumers differentiate DFS products from conventional banking products and services; ensure ease of access to information on all product offerings to enable consumers make informed decisions; provide information on products in simple english and local languages; conduct outreach to underserved populations regarding DFS options available to them and provide information on product usage and how to obtain support services when the need arises.”
In addition, DFSPs are expected to “develop and deliver educational materials to prospective and existing customers through basic channels such as Short Message Service (SMS), Unstructured Supplementary Service Data (USSD) and at agent locations, in addition to app, web and social media platforms and submit developed educational materials to the Director of Consumer Protection, CBN for review.”
Furthermore, under the guidelines, CBN stated that DFS providers were required to “disclose all terms, conditions, fees, and other associated charges on product offerings prior to enrollment; ensure integration of data privacy and protection standards into internal policies; conduct evidence -based awareness campaigns to sensitise consumers on how to protect their assets and sensitive details and develop default settings on DFS which are by nature ‘opt-out’ not ‘opt-in’ of data sharing with third parties, and clear and simple ‘opt-in’ language for sharing of data.”
The guidelines also proposed that DFS providers should ensure privacy to data collection and sharing during product enrollment as well as ensure easy opt-out process for data sharing.
On product usability and market testing, the guidelines stated that DFS Providers, should “ensure that products deployed are suitable for the target customers; test product usability with users and modify as necessary to reduce transaction errors and provide consumers with reliable and easily accessible channels to enable them obtain support services.”
In order to prevent fraud and manage its attendant risks, the exposure draft proposed that DFS providers should “provide fraud prevention messages and tips for consumers using both audio and virtual modes of communication in local languages and also monitor fraud reports to identify emerging fraud and sensitise their customers on how they can protect their assets.”
The document also stated that DFS providers should “put in place strategies to assess their policies on raising consumer awareness and product usage; develop indicators and performance measures to assess changes in awareness and usage; forward their strategies and performance measures to the Director of Consumer Protection, CBN bi-annually for review and forward monthly returns on consumer awareness programmes/ initiatives conducted to the Director, Consumer Protection, CBN.”
Conclusion
However, the view among industry stakeholders is that while the effective use of digital technology can clearly help to accelerate financial inclusion in Nigeria, the country’s erratic power supply problems could be a major challenge.
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Source : From the Web