Rakiya Muhammad is Chief Information and Technology Officer at the Central Bank of Nigeria (CBN) and Coordinator of the eNaira Project. In this interview with Daily Trust, she explains why the CBN launched eNaira and how it will drive the government’s cashless policy. Excerpts:
OWhat drove the CBN’s decision to create eNaira?
Our banking and payments landscape is one of the most mature in the world. In fact, we are way ahead of the so called developed world in terms of sophistication and innovations that we have seen in the fintech space.
We were one of the first to introduce USSD because we had to look at our own particular challenges and innovate products around that. Our payment is one of the best in the world; there are statistics that show that we have some of the most cutting-edge products available in the system.
We have a very dynamic population, eager to learn, well equipped and very serious. Next, we have a regulator that embraces innovation. I will say that everyone plays a role in this situation given the right environment where innovations can thrive, have the people who are ready to play and have the organizations who are ready to adapt.
With each innovation, there are three parts: the part whose concern is to put the product on the market, there are the users wishing to use the product and between them is the regulator. Our role as CBN is to ensure that we protect and enable this innovation while protecting the consumer interest.
Young people thought eNaira would mirror Crypto currencies and are disappointed that it is no different from commercial bank mobile apps?
eNaira allows you to perform peer to peer transactions like with crypto and cash. eNaira is legal tender, this means it is guaranteed by law and individually traded with naira, so anything you can do with cash, you can do the same with naira.
We offer you the same experience you will have with crypto, you don’t have to be there to make a transaction. You can access eNaira by phone. With the introduction of USSD, you can dial *997# and complete your transaction. So we are bringing people who until now could only use money by being physically present where the transaction happens into an online version, a digital economy space where you are convinced that the value of this eNaira is always the same as that of silver.
With crypto though, consumers got hurt, people died, people lost their money, and people saw a platform where they could launder money, sponsor terrorism, and several other bad things. The reason is that the transactions that take place between people are encrypted, people do not see them, so it is very difficult for the regulator to be able to regulate this type of environment.
Look at the volatility of cryptocurrency prices a few months ago. From over N20 million per Bitcoin to less than N10 million, so if you had invested in three Bitcoins, you would have lost over N30 million.
In the financial system, we have taken a deliberate step to be able to hedge against such risks. So if a bank fails, we have the NDIC that has insured your deposit. But this one, you have no idea how much people invest; you don’t see the transactions happening, you’re not able to separate the bad guys from the good guys. So this is something that will require the collaboration of central banks around the world, because it is not just in Nigeria. You can transact with someone in Antarctica without anyone knowing. Its own central bank does not know, the central bank here does not know. So how do you protect that interest?
Are there any possibilities that eNaira can be used for transactions beyond the shores of this country?
What CBN does is we provide a platform. If you follow the hackathon we held, we had some brilliant ideas, over 4000 entries, from young Nigerians, who learned that they could create a product on top of that. Some of the products we’ve seen are meant to give people the ability to staking, which is like earning income on their eNaira.
On the issue of cross-border and remittances, in our concept paper that we released a year ago, the governor said that eNaira is a journey, the next phase is to enable people to be able to make transactions. Thus, most countries are cautious when it comes to transacting with currencies that are not your own. You don’t want to end up in a currency substitution situation. We have the international settlement bank that works with a number of central banks to do and facilitate cross border transactions in different digital currencies and when that happens people can transact with eNaira and be able to buy things .
How about the hassle of migrating funds from commercial banks to the CBN since eNaira is domiciled with the apex bank?
One of the risks we looked at when designing the product is financial disintermediation. We don’t want that to happen. If there are no deposits in commercial banks, they will have no money to lend and if they do not lend money, it means there will be no business in the industry and all kinds of negative impacts on the economy.
We recognize this, so we’ve limited the amount of money people can hold in their various wallets. We have four different portfolio categories. We have tier three clients with a bank, as each wallet is attached to a bank, and you can hold a maximum of 5 million naira per day and your transaction cannot exceed 1 million naira per day. We expect people to put their money back in their bank account once they pass this threshold in order to proceed with this transaction.
It is the same with the other wallets and the lowest wallet has a maximum transaction limit of N20,000 and a maximum balance of N50,000 per day. If you look at that, it doesn’t really impact the money in circulation, so we’re taking the money out of circulation so people can transact. We are looking at micropayments so we are not making eNaira for big men to buy a 10 million naira mansion as they cannot pay with eNaira in this type of transaction.
CBN created the financial sandbox where bright minds can test the innovations they’re working on, what’s the update?
It’s a platform for you to pitch your ideas and we, as the regulator, are able to assess the product and offer advice to ensure that once the product is on the market, consumer protection is already built into it. It’s quite a journey and I think in the coming weeks we should decide on the sandbox, to open it to the public, where people can submit their applications and have the opportunity to present their product, then we can see how we can continue to innovate around that.
What made you choose IT, did you know that the world was going to depend so much on IT?
I didn’t know the world was going to change but I remember my father wanted me to study medicine. But I couldn’t stand the sight of blood and during biology class I would run away from class but I love math.
When Jamb came and we watched with my mentor in high school, the best place was to go to computer science because it was math heavy. In fact, at school, we did the same courses until the third part before choosing your specialty. This is what motivated my choice to get into IT and, as God wanted, the whole world went to IT. This is how I find myself here.
How was your journey to becoming the head of CBN’s IT department?
I started my career a long time ago, and I went through several companies before being appointed director of information technologies at CBN, having worked in various environments which were very enriching because I had the opportunity to learn different cultures from different organizations.
I also had the opportunity to learn different areas such as the core business. I’m learning how to deal with different types of people. Incidentally, most of my bosses were men. Throughout my career, I’ve only had one female boss. I must say thank you to the men for guiding me to be where I am today. Learning from different people has been interesting enough to be able to look at people from different angles, but what has been a bit difficult is adapting to new cultures when moving to a new organization. The transversality through different organizations helped me to be able to handle different situations in different places and at different times.