eNaira

eNaira- Yay or Nay? Coronation Merchant Bank Speaks

Published

3 years ago

September 7, 2021

Central Bank of Nigeria CBDC - Investors king

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.

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eNaira to Protect Nigerians, Strengthens Financial System – CBN

Samed Olukoya

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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eNaira

eNaira Volume Surges by 284.6% to N9.78bn in August – CBN Report

Published

4 months ago

December 29, 2023

Investors King

The volume of eNaira in circulation surged by 284.6% to N9.78 billion, according to the Central Bank of Nigeria (CBN) in its recently published ‘Economic Report’ for August 2023.

This surge, however, stands in stark contrast to the declining trend observed in the volume of traditional notes and coins, which dipped by 14% to N2.65 trillion in the same month.

Despite the substantial increase in the volume of eNaira, the CBN emphasized that its share in the overall currency in circulation (CIC) remains relatively insignificant.

The ratio of eNaira to CIC stands at 0.37%, with notes and coins dominating at 99.63%.

The CBN report indicated that the reduction in the currency in circulation, declining by 11.7% to N2.66 trillion, was primarily influenced by the growing adoption of alternative payment channels.

More individuals are opting for electronic transfer payments and other digital platforms, contributing to the moderation of growth in reserve money.

The extension of time for companies to submit their annual returns, from January 1, 2024, to April 1, 2024, was also outlined in the CBN statement.

This extension, prompted by glitches on the company’s registration portal and a nod to the Micro, Small, and Medium Scale Enterprises sector, temporarily withholds penalties for companies falling within the earlier deadline of January 1, 2023.

The CBN encouraged entities registered under the Companies and Allied Matters Act to utilize the extended window to fulfill their annual return obligations, recognizing the challenges faced by businesses in adhering to the initial timeline.

While the eNaira has seen a significant surge in volume, its adoption, according to a report by the International Monetary Fund (IMF), has been slow.

About 98.5% of eNaira wallets have reportedly remained unused a year after the digital currency’s launch.

The IMF report noted a gradual increase in retail wallet downloads, with eNaira adoption representing only a small fraction of Nigeria’s active bank accounts.

The CBN continues to navigate the dynamic landscape of digital currency adoption, with the eNaira experiencing both growth and challenges.

The central bank’s efforts to strike a balance between traditional and digital currency usage reflect ongoing shifts in the financial landscape and the evolving preferences of businesses and consumers.

eNaira

IMF Managing Director Cautions About Unforeseeable Consequences of Retail CBDCs

Published

12 months ago

May 4, 2023

Samed Olukoya

The Managing Director of the International Monetary Fund (IMF), Kristalina Georgieva, has expressed her concern about the potential consequences of retail central bank digital currencies (CBDCs).

Speaking at the Milken Institute’s 2023 Global Conference on May 1st, Georgieva cautioned that retail CBDCs have far more room for error than wholesale CBDCs.

She explained that wholesale CBDCs, which are designed to allow financial institutions to carry reserve deposits with a central bank, can be put in place with fairly little space for undesirable surprises.

However, retail CBDCs, which are state-backed virtual currencies issued by central banks for use by consumers and businesses, completely transform the financial system in a way that we don’t quite know what consequences it could bring.

According to a report by Cointelegraph, the IMF is collaborating with around 50 countries to ensure best practices are adopted for CBDCs, which Georgieva expects will have a huge influence on banks and economies in the future.

The caution from the IMF comes as Nigeria became one of the first countries in the world to launch a public CBDC, called the eNaira, on October 25, 2021.

The Central Bank of Nigeria (CBN) defines the eNaira as a digital currency denominated in Naira that serves as a medium of exchange and a store of value.

During the launch, the Governor of the Central Bank of Nigeria, Godwin Emefiele, stated that the eNaira was presented after four years of research by the apex bank.

The CBN governor claimed that 33 banks were successfully integrated into the eNaira network, with the apex bank minting N500m for the currency’s inauguration.

As of December 2021, the eNaira consumer wallet had over 583,000 downloads, while the merchant wallet had 83,000 downloads from over 160 countries. On Tuesday, the CBN governor disclosed that e-Naira transactions hit about N1.4m as of March 31, 2023.

The launch of eNaira and the increasing interest from other countries in developing their own CBDCs have raised concerns about the potential risks and consequences of such currencies.

The IMF’s caution highlights the need for caution and careful consideration in the development and implementation of CBDCs to mitigate any negative impacts they may have on the global financial system.

eNaira

Nigerians Turned to eNaira For Transactions as Naira Scarcity Persists

Published

1 year ago

March 23, 2023

Investors King

Recent reports reveal that Nigerians increasingly turned to the nation’s digital currency eNaira as transaction value jumped a whopping 63% to N22 billion ($48 million) amid the ongoing cash crunch bedeviling the country.

The number of eNaira wallets is reported to have jumped more than 12-fold to 13 million since October last year.

Speaking on the recent surge in the adoption of the eNaira, Nigeria’s Central Bank Governor Godwin Emefiele said the eNaira has emerged as the electronic payment choice for financial inclusion and executing social interventions.

He further noted that the Naira circulation in the country had dropped to around 1 trillion Naira from 3.2 trillion Naira in September 2022. Hence, to bridge this deficit, he disclosed that more than 10 billion Naira of the CBN’s digital currency has been minted so far, and about 3.4 billion Naira is in circulation.

The increased rate of the eNaira adoption in Nigeria doesn’t come as a surprise owing to the fact that Nigerians have been struggling with a crippling cash shortage since the CBN policy to redesign the higher denominations (N200, N500, N1,000) of the naira notes.

Currency in circulation slumped to about 1 trillion naira from N3.28 trillion in December 2022 to N1.38 trillion in January and an estimated N982.09 billion in February 2023 representing a 235 percent decline. The shortage of cash has left many individuals in the country of about 218 million struggling to pay for basic needs. Investors King understands that Nigeria which has a $220 billion informal economy, thrives on cash transaction.

Recall that the eNaira was launched by the Central Bank of Nigeria in October 2021, which saw Nigeria become the first country in Africa to launch its digital currency. The CBN disclosed that the eNaira was introduced to increase remittances, foster cross-border trade, improve financial inclusion and enable the government to make welfare payments more easily.

The launch of the CBN digital currency however came as a surprise to a lot of Nigerians, as the CBN has been suspicious of cryptocurrencies, such as Bitcoin, after it issued a directive that prohibited banks from taking part in financial transactions involving cryptocurrencies, which many Nigerians often use as a hedge against naira depreciation.

At the initial launch of the eNaira, it was faced with widespread rejection and less usage from Nigerians. A year after the launch of the eNaira, less than 0.5% of Nigerians were using it. In a bid to encourage the digital currency adoption at the grassroots level, the CBN offered Keke NAPEP (tricycle taxis) and their customers a 5% discount for using the CBDC as means of payment.

In November 2022 one year after the eNaira launch, the CBN celebrated 700,000 completed eNaira transactions valued at ₦8 billion ($17.4 million). If the shortage of cash persists in the country, it is not far-fetched to say that the eNaira transaction rate would record another significant increase.