Prior to the instructions of the Central Bank of Nigeria (CBN) on February 5, 2021, as regards banks and other financial institutions to refrain from dealing with cryptocurrency (a digital currency) and facilitating payment for cryptocurrency exchanges, various crypto-based companies were frustrated out of the Nigerian market and the development of other digital and virtual currencies in Nigeria decelerated.
Interestingly, the CBN has launched a project titled “Project Giant” on June 24, 2021 – a project to produce and issue a government-controlled digital currency in Nigeria known as “eNaira”. On August 27, 2021, the CBN circulated a presentation to licensed Financial Institutions (FI) which provide guidelines on the issuing and operating eNaira in Nigeria. Taking a closer look at the eNaira, this article has highlighted the pertinent features of eNaira and its prospective operations in Nigeria.
eNaira In a Nutshell
The eNaira is a digital representative of the physical naira note to be issued by the Central Bank of Nigeria. It will be a supplementary legal tender in Nigeria, having the same value as fiat naira, and maintain “parity of value” with the naira thus it will not earn any interest to holders.
The eNaira is built on a blockchain open ledger technology which makes it impossible to have a duplicate or fake naira as each naira will be unique. It is similar to Tunisias’ eDinar, Venezuelas’ Petro, and Swedens’ eKrona.
CDBCs and Cryptocurrencies
Although a digital currency, the eNaira is different from other cryptocurrencies using blockchain technology such as Bitcoin, Ethereum, and the likes, in that it is issued by a sovereign authority.
The eNaira users will not be anonymous as it is for other blockchain tech because all authorized users will partake in an onboarding exercise thus providing personal details such as BVN and NIN as the case may be.
Does eNaira differ from other Crypto?
CBN in a message through its Director, Information and Technology, Rakitya Muhammed said the introduction of the eNaira can catalyse Nigeria’s digital economy, and boost cross border trade. Muhammed who spoke virtually at the Third Quarter Industry Forum of the committee of E-business Industry Heads on Wednesday also added that the eNaira will provide more data to the government to formulate better macroeconomic policies.
“We believe that the eNaira will be a catalyst for the digital economy because the people who are outside the formal banking sector will be integrated.”
Is the eNaira a Stablecoin?
What is Stablecoin? A stablecoin is a cryptocurrency backed by reserves. Stable coins are backed by holding an equal equivalent of FIAT money like the US Dollar.
FIAT means government-issued but usually not backed by any commodity e.g gold. Thus a stable coin like USDT is tied to a currency, US Dollar, and maintains a stable exchange value.
The eNaira is technically linked to the FIAT Naira, but is Naira stable? To be a stablecoin, the eNaira has to be linked to currencies like the US Dollar or Euro or even the Yuan.
- Peer to Peer Payment: Enables users to send money to one another through a linked bank account or card.
- Bank Account Management: Customers can make in-store payment using the eNaira wallet by scanning QR Code.
- Unified Payments System: Users of eNaira wallet can now move money from their bank account to their eNaira wallet with ease.
- Verified Payment: Customers can verify their payments and look up their transaction history anytime.
Why should I use the eNaira?
The eNaira has a low-cost advantage when compared to FIAT. The daily transfers between accounts are at no cost to the holder of the account. Lower transaction cost is a massive incentive as traders will pay no fees for withdrawals and deposits to and from their bank account. Little or no transaction fees reduce the cost of commerce while improving safety.
eNaira Website, Apps and how to get it
Ahead of of launch on 1st October, 2021, the eNaira website has gone live listing all the benefits of the digital currency.
The eNaira would be accessible via the eNaira wallet in mobile stores – Google Playstore, and Apple AppStore.
The CBN has planned a rollout in a levelled manner by first issuing the eNaira to financial institutions like banks, after which it will be retailed to each wallet owner.
If your daily transaction value is less than NGN50000.00, a bank account is not necessarily needed to get eNaira; a NIN verified phone number will do.
To withdraw N50,000 or more, Bank Verification Number (BVN) is required as well as NIN verified phone number.
The CBN has very strict “Know Your Customers” protocols for this process, the goal is to assure all retailers of the safety and utility of eNaira.
It will circulate alongside cash. The eNaira will complement cash as a less costly, more efficient, generally accepted, safe, and trusted means of payment.
How will Dollar remittance to e-Naira work?
The eNaira will be integrated into the CBN’s forex process, and this is to make it easier to receive remittances to Nigeria. These transfers could be from the CBN crediting eNaira directly into the International Money Transfer Organisation (IMTO). A US based person sending $500 to a Nigerian can debit his/her US Bank account and credit $500 to an IMTO, who will buy eNaira from their corresponding Nigerian bank. The $500 is converted to eNaira instantly at a very low transaction fee which is the major benefit and significant advantage the eNaira will enjoy.
Chances eNaira can become the ECOWAS currency
The eNaira can be used by any two two parties who can credit a Nigerian banking institution with corresponding currency. This means a trader banking with UBA in Burkina Faso can settle his bills from the Gambia using eNaira. This will be the next tier of the rollout. The financial institutions and FINTECH start to build out an ecosystem with eNaira as the base product.
Potential risks associated with eNaira
Data security- the eNaira is online, so is the BVN and NIN information too, the risk of malicious actors attempting to hack or gain access to the data is very low. The process of minting and burning the eNAira tokens by the CBN is top-notch.
eNaira is safe and secured with cryptographic techniques against counterfeiting, cloning, and other forms of attacks.
It is an additional bonus to the NIgerian economy, and a positive progression towards a cashless society with lower costs, and higher productivity.
Prior to the CBN’s presentation, the responsibility is on banks to promote and market the centrally issued digital currency as a cash alternative to existing and potential customers in support of its goal for financial inclusion.
It said that banks would facilitate the onboarding process of the eNaira and provide world-class customer service.