Investigation On The Risk Attached To Using E-Naira In Nigeria

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Investigation On The Risk Attached To Using E-Naira In Nigeria

Chapter One


1.1 Background of the Study

Connection to the financial system is very important to different economies in the world. Digital currencies have attracted strong interest in recent years and have the potential to become widely adopted for use in making payments. Gilbert, Scott & Loi, Hio. (2018) espoused that digital currencies (sometimes also referred to as digital money, electronic money, or electronic currency), either privately-or publicly-issued, are a type of currency available in digital form. Examples include virtual currencies, cryptocurrencies and central bank digital currency (CBDC). That is to say, digital money can either be centralized, where there is a central point of control over the money supply, or decentralized, where the control over the money supply can come from various sources. Public authorities and central banks around the world are closely monitoring developments in digital currencies and studying their implications for the economy, the financial system and central banks. This lack of physical form allows nearly instantaneous transactions over the internet and removes the cost associated with distributing notes and coins, which would give room for the achievement of financial inclusion, which is the compelling factor that incited the Central Bank of Nigeria to invent a digital mode of payment even as it is set to launch its first digital currency.

According to Nanda, Kajole; Kaur, Mandeep (2016). The idea of digital currency, in a broad sense, merges the traditional features of money with the convenience of electronic transactions, the bank debit card being a leading example. However, the public acceptance of electronic banking transactions has made possible the emergence of an alternative form of digital money, not tethered to a bank account or other traditional store of value, whose trustworthiness lies in the computer algorithms that underlie its construction and distribution

Digital currencies, especially those which have an embedded decentralised payment mechanism based on the use of a distributed ledger, are an innovation that could have a range of impacts on various aspects of financial markets and the wider economy. These impacts could include potential disruption to business models and systems, as well as facilitating new economic interactions and linkages. In particular, the potential implications of digital currencies and distributed ledgers on retail payment services seem to be especially important, as these schemes have the potential to facilitate certain retail payment transactions (eg for e-commerce, cross-border transactions and person-to-person payments), and possibly make them faster and less expensive for end users such as consumers and merchants (Bank for International Settlements 2015).

Taking advantage of this rapid technological progress and financial market development, has led world economies into transiting from paper currency to digital currency of which Nigeria is not not left behind. Abdulkareem (2021) explored that central banks globally have been working delicately on their digital currency by gradually weaning themselves off rapidly-declining cash payments, and this is the reason the Central Bank of Nigeria joined the fray so that Nigeria is not left in the lurch which gave rise to the launch of her e-Naira which is coming after instructing banks to close cryptocurrency and ban crypto-related accounts in February 2021 ( However, the implications for payment system efficiency are still to be determined and the potential risks that may arise from the operation of these schemes. Thus, should digital currencies become widely used for large-value transactions or for other asset types beyond funds transfers, their impact on other areas of responsibility for central banks, such as payment system oversight and regulation, financial stability and monetary policy, and associated tendencies of fraud and money laundering, might become more prominent, posing a relatively high risk for public users.

1.2 Statement of the Problem

Prior to the advent of electronic naira, Nigeria paper naira has faced massive foreign exchange crisis and the rate of depreciation of the naira has sparked serious concern among citizens which necessitated the need to try an alternative legal tender. Additionally is the ban of cryptocurrency as instructed by CBN in the early quarter of 2021 hence the need to develop the country currency from paper to electronic.

Emmanuel (2021) opined that many reasons have been advanced as to why central banks are considering issuing their own digital currency, including lowering the cost of managing paper currency, leveraging new emerging digital technologies, improving the digital readiness landscape, maturing identification registries, driving financial inclusion, making tax and revenue administration easier, and so on. However, it is pertinent to evaluate the risks involved in this enterprise despite the foolproof safeguards that the CBN will implement in good faith as the host and custodian of the nationโ€™s financial services ecosystem. Kalu (2021) was of the opinion that this is because digital wallets, by their own very nature, enhance systemic fraud risk due to the velocity of money and transactions, which can have a significant impact on the entire financial services ecosystem if there are spillover effects from significant failures arising from a mass-market financial services system, which the CBDC is positioning to become.
On the other hand, Abdulkareem (2021) in Premium Times asserts that individual users have been bothered by risks associated with using eNaira, such as the security of their wallet, anxiety about hackers tampering with their account, debit without credit, and fraudulent activities carried out by online fraudsters and theft. Therefore, it is against the backdrop that this study seeks to critically investigate the risk attached to using e-Naira in Nigeria.

1.3 Objective of the Study

The broad objective of this study is to critically examine investigate the risk attached to e-Naira usage in Nigeria. Specifically the study seeks to

  1. To ascertain the perceived benefit of e-Naira invention
  2. To examine if there are associated risk attached to e-Naira Usage
  3. To determine if individual users will have trust issues in accepting e-Naira currency

1.4 Research Question

The research is guided by the following research questions

  1. What are the percieved benefit of eNaira currency as stated by CBN?
  2. Are there any risk attached to eNaira Usage?
  3. Will individual users have trust issue in the safety of their data while accepting eNaira currency?
  4. What are the general risk associated to eNaira invention in Nigeria?

1.5 Significance of the Study

Findings from the study will be of great significance to policy makers, development experts, financial institutions and the general public especially the individual subscribers. The study based on its findings will be useful the professional bodies regulating the eNaira platform, hence will keep them informed about public perception of the newly launched platforms. Additionally, the study will serve as a source of information to researchers, students and other academic inclined individuals who may be carrying out research on a related topic.

1.6 Scope of the Study

The scope of this study borders on the investigation of risk attached to using eNaira in Nigeria. The study will unearth the trust perspective of individual users and if there are fear they will have before opting to use eNaira platform. The study is however delimited to Ibadan Metropolis, in Oyo State.

1.7 Limitation of the Study

Like in every human endeavour, the researchers encountered slight constraints while carrying out the study. The significant constraint was the scanty literature on the subject owing that it is a new discourse thus the researcher incurred more financial expenses and much time was required in sourcing for the relevant materials, literature, or information and in the process of data collection, which is why the researcher resorted to a limited choice of sample size. Additionally, the researcher will simultaneously engage in this study with other academic work. However in spite of the constraint all these constraint were downplayed to give the best.

1.8 Definition of Terms


Risk involves uncertainty about the effects/implications of an activity with respect to something that humans value, often focusing on negative, undesirable consequences.


This is the basic monetary unit of Nigeria.

Digital Currency:

Digital currencies are monies that exist not in physical form but only as electronic data, but perform the basic functions of money being unit of account, store of value and means of exchange.


eNaira is the name given to the CBN’s first proposed digital currency. eNaira is a central bank digital currency (CBDC) issued by the Central Bank of Nigeria as a legal tender. It is the digital form of the Naira and will be used just like cash.

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