The Central Bank of Nigeria (CBN) has said the Central Bank Digital Currency (CBDC), eNaira, will strengthen the Nigerian banking system and protect Nigerians from the unregulated crypto space.
Mr. Folashodun Shonubi, the Deputy Governor, Operations, CBN, disclosed this at the virtual Chartered Institute of Bankers of Nigeria (CIBN) advocacy dialogue series 4 held on Thursday in Lagos.
He said eNaira will make it easier for operators in the banking system to comply with existing laws such as customer protection against fraud and anti-money laundering.
Shonubi explained that “The Central Bank in its implementation has ensured the e-Naira feeds our economy and provides greater value.
“The central bank digital currency offers all the benefits of cash but in digital form. Every single digital currency is an electronic version of the cash, the legal tender. When you make a cash payment, settlement is done instantly; digital currencies entail the same promises and even more.
“CBDC offers a safer option from the privately issued cryptocurrency which have been based on the possibility to enable cheaper transactions but have now been used for investment.
“The intention is not to eliminate other forms of payment but to complement the current areas of payment options, thereby ensuring the stability of the payment system in the long run. I expect in the coming days we will see rapid inclusion rates.
“For banks in developing nations, it will enhance their liquidity, efficiency in national remittances and challenge the high cost of remittances as the world rebounds in the post-pandemic. I am of the view that the era of CBDC promotes greater opportunities, and the central bank must be aware of the risks and mitigate them.”
Also speaking at the event was Lamido Yuguda, the Director-General of the Securities and Exchange Commission (SEC). He said eNaira scheduled to be launched in October 2021 will help deepen the capital market, increase financial inclusion and further diversify deposit and payment methods.
Yuguda said, “This is an opportunity for the fintech market to connect our people to existing opportunities in the financial market, connecting our people with investment opportunities in other climes. Once we do that, we would grow our market, Nigeria has 200 million people. We are blessed with a hardworking youthful population.
“This capital market would in turn finance the necessary infrastructure investment that this country needs today.”
Official eNaira Website Goes Live
The Central Bank of Nigeria’s (CBN) eNaira website has gone live a week before the planned launch of the digital currency.
The website promises easier financial transactions for users of eNaira, offers opportunity for peer-to-peer payments which allows users to send money to one another through a linked bank account or card; allows customers to move money from their bank account to their eNaira wallet with ease; can monitor their eNaira wallet, check balances and view transaction history; and make in-store payment using their eNaira wallet by scanning QR codes.
In addition, customers are allowed to scan the QR Code on the website to get started.
CBN Governor, Mr. Godwin Emefiele, while speaking to a gathering of foreign investors in New York, recently, had told his audience that because of activities surrounding the country’s Independence celebration on October 1, the earlier planned launch of the eNaira on same date would likely be rescheduled to October 4, 2021.
“The central bank would not want the event to take the shine away from the Independence celebration,” he said.
“We are going to be the first country in Africa to launch a digital currency. It is a novel idea because we think it will facilitate trade, Nigeria being the biggest economy in Africa, this will set the tone to tell Africa that we are ready to lead and we would indeed lead in trade and we would make sure that happens.
“Between all central bankers in ECOWAS, we are already working on certain collaboration to make trade, payment and banking system integrate in such a way to set example on the African Continental Free Trade Area (AfCFTA),” he added.
In line with global trend, the CBN recently took a major step towards the launch of its digital currency with its formal announcement of its engagement of global fintech company, Bitt Inc. as its technical partner for the project. To choose the technical partner, the CBN went through a rigorous vendor selection process in line with the Public Procurement Act, conducted by seven departmental directors and a Deputy Governor whereby several companies were evaluated. The evaluation was based on the following criteria: technology ownership and control; implementation timeline; efficiency, ease of adoption; support for anti-money laundering and combating the financing of terrorism (AML/CFT); platform security; interoperability; implementation experience.
Emefiele expressed optimism that the eNaira, would bring about increased cross-border trade, accelerate financial inclusion and lead to cheaper and faster remittance inflow. He said the digital money would lead to easier targeted social interventions, as well as improvement in monetary policy effectiveness, payment systems efficiency, and tax collection.
According to him, after its unveiling, Nigerians should be able to download the eNaira app from either Google plays store or Apple app store, on board themselves and fund their eNaira wallet using their bank account or with cash at a registered agent location.
“If you are a bank customer and you have say N10 million in your bank account, for your comfort of spending and making purchase, you can tell the bank to load N2 million out of your N10 million into your wallet.
“So, your bank balance in physical cash drops to N8 million, while your e-wallet carries N2 million. With that you can make purchases both within and across the country.
“There are so many variance of the eNaira. But this is where we would start because we are not going to pretend that there are not risks in opening your system up. We would look at the various products, determine the risk, determine the best way to mitigate the risk before we now open it up more and more,” Emefiele added.
Also shedding more light on Bitts, he said, “we chose them as a partner. In some other climes where they are, they have their software and they earn their money. But we chose that they would establish their company in Nigeria. “The CBN will own substantially stake in that company. It is a company that will be established in Nigeria and majority holding will be the CBN,” he added.
On his part, the CBN’s Director, Corporate Communications Department, Mr. Osita Nwanisobi, explained that the eNaira project had been a long and thorough process for the apex bank following its resolve in 2017, to digitise the local currency after extensive research and exploration.
Meanwhile, China’s central bank last weekend announced that all transactions of crypto-currencies are illegal, effectively banning digital tokens such as Bitcoin.
“Virtual currency-related business activities are illegal financial activities,” the BBC quoted People’s Bank of China to have said, warning it “seriously endangers the safety of people’s assets”. China is one of the world’s largest crypto-currency markets. Fluctuations there often impact the global price of crypto-currencies.
The price of Bitcoin fell by more than $2,000 (£1,460) in the wake of the Chinese announcement.
It was the latest in China’s national crackdown on what it sees as a volatile, speculative investment at best – and a way to launder money at worst. Trading crypto-currency had officially been banned in China since 2019, but had continued online through foreign exchanges. However, there has been a significant crackdown this year.
In May, Chinese state intuitions warned buyers they would have no protection for continuing to trade Bitcoin and other currencies online, as government officials vowed to increase pressure on the industry.
In June, it told banks and payment platforms to stop facilitating transactions and issued bans on “mining” the currencies – the trade of using powerful computers to make new coins.
eNaira- Yay or Nay? Coronation Merchant Bank Speaks
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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