The prospect of Africa’s biggest economy going cashless has led to the revolution in its digital payment landscape and the move to deepen its financial inclusion penetration.
The Central Bank of Nigeria (CBN) with support from major financial players has been working to deepen financial inclusion in the country. However, 38.1 million of the country’s 106 million (18 years and above) adults remain completely financially excluded, according to the 2021 ‘Global Findex Database’ report from the World Bank.
Nigeria’s quest to deepen its financial inclusion lies in digital currency adoption. At a recently concluded Blockchain technology-focused event tagged Web3: engineering tomorrow’s internet Obi Emetarom, co-founder and managing director of Appzone, said that the adoption of digital currency remains the most practical and easiest way for the country to deepen its financial penetration.
“Not having a fully financially included nation today is because physical cash based on fiat currency is still very much in circulation. Because digital currencies do not have nor need paper cash equivalents, an immediate transition into fully digital payments based on digital curre“However, three key issues being regulation, interoperability, and ease of use must be addressed.”
Despite the circulation of fiat currency, the term cash is king might be fading quickly. There has been an organic rise in the adoption of digital currencies by people across the globe, including Nigeria.
During the COVID-19 pandemic, especially, the use of cash dwindled drastically as more people turned to digital alternatives for security concerns. Beyond this, the increase in cross-border and intra-country transactions is making it almost impossible to trade in cash.
A report released by PricewaterhouseCoopers (PwC) titled ‘Charting a cause amid evolution and revolution’ also states that cashless transaction volumes will increase by over 80percent to 1.9 trillion by 2025 and digital payments per person will triple by 2030.
According to a Strategy representative, the Covid-19 pandemic has accelerated the switch from cash to digital payments by three to five years. Africa is expected to grow by 78percent by 2025 and by 64percent by 2030.
This trend is likely to continue even as banking processes are becoming more technologically sophisticated and as such, simplified for end-users. Transferring money from one bank to the other is becoming easier with theFor instance, Appzone, an African Payment infrastructure company, recently launched ZONE, Africa’s first decentralized blockchain payment network that will allow inter-bank transactions to be processed directly between banks without the involvement of any intermediary.
With this infrastructure, issues like system failures, transfer delays, and missing funds, etc. will be eliminated and customers can make transfers and be rest assured their money is safe.
Speaking about Zone at the launch event some months ago, Uzoma Dozie, CEO and founder of Sparkle, said that “the solution debuted at a time when banks were looking for new ways to make payments seamless and hassle-free for more Nigerians and Africans in general. This is what will bring real change to the market. It is going to create more adoption in space.”
As the world -including Nigeria- continues to embrace digital transactions as a preferred method; it becomes easy to argue for the adoption of digital currency as the key to a financially inclusive Nigeria. However, the big question remains how do we then leverage this opportunity to reach the unbanked?
Reaching the financially excluded
The CBN is also not excluded in the race for a digital currency. It launched its Central Bank Digital Currency tagged e-Naira in 2021. It is believed that the eNaira is envisaged to bring multiple benefits as the currency becomes more widespread.
Amongst other benefits CBN listed, the core of it is to increase financial inclusion. An International Monetary Fund report shows that although the eNaira wallet is currently provided only to people with bank accounts, its coverage is expected to eventually expand to anyone with a mobile phone even if they do not have a bank account.
Many people do not have bank accounts (38 million people; 36 percent of the adult population) and allowing those of them with a mobile phone to have access to the eNaira would increase financial inclusion and facilitate more direct and effective implementation of social transfers programs. It is expected that the move would enable up to 90 percent of the population to use the eNaira.
Technology infrastructure providers like Appzone are also not relenting in the race to develop best-in-class technologies to enable this space.
The leading payment infrastructure company says its vision is for digital payments and DeFi to replace cash and Traditional Banking in Africa. They have been prominent for launching groundbreaking technologies to enhance the growth and operations of the financial players.
No doubt, the government, CBN, and industry players are doing quite a lot towards achieving a fully included society. For now, we can’t categorically affirm that the adoption of digital currency is the way to go, but we know it’s a valid option worth exploring.
Recent Comments