In a recent press statement, the Central Bank of Nigeria (CBN) stated its plans to launch its Central Bank Digital Currency (CBDC) pilot scheme called the eNaira on 1 October 2021 with Bitt Inc, a financial technology company that utilises blockchain and distributed ledger technology to facilitate secure peer-to-peer transactions, as a technical partner.
The eNaira is an electronic record or digital token of the naira issued and regulated by the CBN. It is expected to be a legal tender for the country and have a noninterest-bearing status, as well as a transaction limit for customers. Globally, there has been interest surrounding CBDCs among central banks, governments and the private sector. The CBN has been researching CBDCs since 2017.
The concept primarily originated on the back of the popularity of cryptocurrencies like Bitcoin, Ethereum, among others. It has also gained more traction following the onset of the covid-19 pandemic and a global need to distribute as well as efficiently track economic stimulus funding, prevent illicit activity and illegal transactions. As such, the eNaira aims to bring the best of both worlds—the convenience and security of digital cryptocurrencies alongside the traditional banking system’s regulations.
Coronation Merchant Bank understand that to use the eNaira to transact, users need to download the speed wallet, validate their account on the wallet by using either their phone number, national identity number (NIN) or bank verification number (BVN).
In addition, users will be able to transfer money through peer-to-peer (P2P) transactions from their ewallets to other wallet holders and person-tomerchant/business. The structure of the eNaira is similar to a commercial bank account.
However, it is non-interest bearing. Excluding executing and managing digital currency tokens, the CBN would be able to gather, analyse and store data on eNaira transactions. The role of deposit money banks would be to take responsibility for conducting KYC and AML/CFT compliance compatibility on merchant eNaira wallets as well as monitoring illicit activity.
For developing countries, Nigeria inclusive, a significant portion of the population remains unbanked. A CBDC such as the eNaira can assist with boosting financial inclusion across the economy given that unbanked nationals often cite distance and transportation costs to banks as a major hindrance to owning a bank account.
Another advantage of the eNaira is the potential for simplifying monetary policy implementation by making it easier to channel money. Remittances also represent one of the most compelling usages for digital currencies by reducing the number of intermediaries, cost, opacity, and time required for cross-border payments. The eNaira could also eliminate some transaction costs, augment expediency, and offer seamless payment services.
However, unlike most cryptocurrencies, the centralised nature of the eNaira means that the CBN would have oversight on all eNaira accounts. Since 2014, at least 60 central banks have been exploring CBDCs. For instance, the Digital Yuan project in The People’s Republic of China is undergoing trials, with at least c.2bn Yuan (approximately USD300m). In addition, countries like the Bahamas, Cambodia, Ukraine, and others have also started CBDC projects.
By eliminating intermediaries, the eNaira could be a reliable low-cost payment solution for consumers and businesses. In addition, the swiftness and ease of business transfers should bolster economic activities, resulting in a broader positive impact on the economy. Furthermore, the eNaira could indirectly assist with expanding the FGN’s tax-net.
eNaira Compatible With Other Countries’ Digital Currencies
The Central Bank of Nigeria (CBN) has stated that the execution of the country’s digital currency will be done in four different phases, and also lead to the cooperation of the eNaira with the digital currencies from other central banks.
This was said at the licensed payment service providers’ engagement session by the apex bank’s Director of the Information Technology Department, Rakiya Mohammed. The session took place in Lagos on Monday and consisted of interaction with a much wider category of industry players.
A statement released by Rakiya Mohammed stated that the CBN and important stakeholders in the payments ecosystem, especially the Payment Service Providers (PSPs) and a wide community of fintech groups, during the engagement session decided to collaborate and ensure that the eNaira which was launched recently is adopted by more people or groups.
Mohammed stated that the complete execution of the digital currency would be done in four different phases, which would culminate in eNaira payment solutions offline, payment across borders and the “interoperability of the eNaira with those of other central banks.”
She also confirmed that the CBN was not competing with the Deposit Banks, neither was it competing with other actors in the payment system space in Nigeria.
According to Mohammed, the engagement session was a continuation of the CBN’s plan to include every stakeholder. She also stated that the country’s apex bank was welcoming of any suggestions and transformations which are directed at adding value to the digital currency and improving the currency’s user experience.
The PSPs (as well as the huge community of fintech groups) were also encouraged to look for more innovative ways to assist members of the public when possible, in the onboarding process and use of eNaira. They have also been encouraged to develop solutions for offline eNaira services, which include cards, wearables and Unstructured Supplementary Service Data (USSD).
eNaira Wallet Records Over 566,000 Downloads from 160 Countries – CBN
In a statement, the apex bank said that over 488,000 consumer wallets have been onboarded so far, with around 78,000 merchant wallets being acquired. The statement further stated that these downloads have occurred across 160 countries, according to data obtained from the Google Playstore and the Apple Store.
The bank also revealed that close to 17,000 transactions have been recorded, amounting to over N62 million. The average transaction falls at $9.3 each, as the numbers suggest a successful adoption rate.
The country’s Central Bank Digital Currency (CBDC), the eNaira was officially unveiled by the Federal Government in October, in the country’s capital Abuja. The CBN stated that the launch of the CBDC was a result of several years of solid research in pushing the boundaries of the payment system, in order to make financial transactions much easier for all the classes of society.
The eNaira is also explained by the CBN as the digital form of the Naira, the country’s official currency and is issued in accordance with Section 19 of the CBN Act. The CBN stated that the eNaira is a legal tender and a direct liability of the bank. The CBDC will form part of the circulating currency and will be on the same level with the physical naira.
The guidelines introduced by the CBN concerning the eNaira state that the digital currency will complement the physical naira as a less costly, safe, more efficient and generally acceptable means of payment.
These numbers – which come less than a month after the official unveiling of the digital currency – show a general anticipation of the CBDC, both domestically (in Nigeria) and in the international market. The high number of downloads shows that people all over the world (Nigerian or not) have been patiently waiting for the digital currency to come out, so that they can acquire it. This bodes well for the future of the digital currency, which looks to be used very often when it finally kicks off properly.
CBN Urges Nigerians to Embrace eNaira amid Bitcoin Surge
The Central Bank of Nigeria has continued to encourage Nigerians to embrace the eNaira, Africa’s first Central Bank Digital Currency (CBDC).
The appeal was made by the Director of the Corporate Communications Department of the CBN, Osita Nwanisobi at the Lagos International Trade Fair.
After inflation data from the United States further strengthened the notion that Bitcoin is a hedge against rising cost pressures, Bitcoin hit another record high and is currently weaving around the $64,000 range. However, the CBN’s ban on cryptocurrency transactions will not enable Nigeria to benefit from the fast-booming crypto market.
The CBN is introducing the eNaira to give the country’s citizens a secure option and satisfy those who have a high appetite for blockchain technology.
Nwanisobi highlighted some of the benefits of the new digital currency, stating that it is expected to “deepen financial inclusion” by bringing more Nigerians into the financial space, support a payment ecosystem with recognizable resilience, reduce the cost of processing cash in the country, enable direct intervention to the welfare of citizens while being completely transparent in dealings, increase transparency in the collection of tax collections and revenue, and reduce the cost of financial transactions.
Nwanisobi also mentioned that the digital currency will facilitate remittances concerning the diaspora, and improve the efficacy of regular payments.
Nwanisobi also acknowledged the positive responses to the launch of the digital currency. He said that customers who download the eNaira Speed Wallet App will be able to create a wallet, fund said wallet from their own bank accounts, transfer eNaira from their wallet to another eNaira wallet, and make payments for purchases at some registered locations. Nwanisobi referred to the naira (physical) as the pride of the nation, urging citizens to embrace the eNaira the way the naira is being embraced.
The CBN’s stance on cryptocurrency has since been known to be negative, as Nwanisobi himself once stated in an email that the Nigerian financial system lacks adequate space for cryptocurrency.
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