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From Uche Usim, Abuja
With a few days to the official launch of the Central Bank Digital Currency (CBDC), eNaira, in partnership with Bitt Inc, Nigerians are anxiously waiting to experience a new banking product touted to be a game changer on the local business landscape.
When the Director of Information Technology, Central Bank of Nigeria (CBN), Rukiya Mohammed, mooted the idea a few months ago, it was greeted with mixed feelings. While some people believed it would be a federally administered cryptocurrency, many others, especially the illiterate population, thought it was just another bogus hoax meant to titillate them.
According to records, 85% of Central Banks globally are working dedicatedly on their digital currency by gradually weaning themselves off rapidly-declining cash payments; and this forms the reason the CBN joined the fray so that Nigeria is not left in the lurch.
According to the CBN Governor, Mr Godwin Emefiele, the eNaira, among others, seeks to help it achieve the apex bank’s monetary policy and financial inclusion objectives. It is also expected to increase the exchange of currency and facilitate cross border trade at a lower cost, especially when more countries unveil their own digital currencies.
After the launch, Nigerian banks are to market and promote the adoption of eNaira as a digital version of cash to existing and potential customers, in support of financial inclusion objective of the CBN.
Already, economy watchers, cryptocurrency traders and other members of the finance ecosystem have begun analysing the impact the eNaira, designed on a blockchain open ledger technology, would have on the economy.
The e-Naira, analysts note, will be a digit representative of the paper naira currency already in circulation that is issued by the CBN. This naturally makes the eNaira a “complementary” legal tender in Nigeria, having the same exchange value as the existing naira, and maintaining a “parity of value” with it.
Another major attribute of the eNaira is that it will not earn any interest to holders. Creating the eNaira on the blockchain means you cannot have a duplicate or fake eNaira. Each eNaira note will be unique.
For skeptics who may not want to honour the new e-currency, the CBN Director of Payment System Management, Mr. Musa Jimoh recently asserted that the eNaira remains a legal tender equal to the naira and must be accepted as a form of payment by all merchants and business establishments at all times.
To beat the October 1 deadline, a three-tier consumer “speed wallet” system will be issued by the CBN before banks and other licensed operators can provide their own wallets for the e-Naira.
The tier 1 wallet is open to anyone without a bank account. It also comes with a transfer limit of ₦50,000 and a cumulative balance of ₦300,000 fixed daily. The minimum requirement to open this wallet is a National Identity Number (NIN).
For tier 2 wallets users, an existing bank account with a linked bank verification number (BVN) is the minimum requirement for this level. Users are restricted to sending and receiving ₦200,000 daily and having a balance of ₦500,000.
Tier 3 wallet holders can transact up to ₦1,000,000 daily with the cumulative balance set at ₦5,000,000. At least a BVN is needed to get this wallet category.
Transaction limits on merchant-level wallets are also set at ₦1,000,000 per day, though there are no limits to how much users can have in their accounts.
The eNaira also has a non-interest-bearing CBDC status and in addition, there won’t be charges on merchant services, user-to-merchant, and peer-to-peer wallet transactions.
The zero charges also apply when users send money from their wallets to bank accounts and make withdrawals at agent or merchant locations.
For dollar remittances, 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 to the International Money Transfer Organisation (IMTO). A Nigerian abroad sending $100 to his relative can debit his US bank account and credit $100 to an IMTO, who will buy eNaira from their corresponding Nigerian bank. The $100 is converted to eNaira instantly at a far lower transfer fee which is a real benefit and a significant advantage the eNaira will enjoy.
After the launch, Nigerian banks are to invite all their customers to register for the eNaira guided by all necessary validation and verification processes.
According to the CBN, the eNaira being a national critical infrastructure, will be fortified with comprehensive security and intelligence systems.
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But despite the CBN’s assurances on security, many people think it’s akin to the unregulated cryptocurrency.
Again, there are also concerns around data security.
According to security analysts, since the eNaira is online, the Biometric Verification Number (BVN), National Identity Number (NIN) information are also online, there is the risk of cyber criminals attempting to hack or gain access to the data. Hence, the process of minting and burning eNaira tokens by the CBN has to be top-notch.
To guarantee massive success, many have called for massive enlightenment, especially among the unbanked and the illiterate since the eNaira has the capability of bringing Nigerians who have no bank account but have a phone into the formal financial economy. With the eNaira, salary payments and payments for goods and services can be concluded. A carpenter can accept payments on his phone, store them in his wallet, and make transactions with any vendor.
Nonetheless, the CBN said that the eNaira is designed to assure all holders that each eNaira is a valid token. This authenticity is achieved by building the eNaira on the blockchain. Every retailer is more likely to accept the eNaira because it cannot be easily faked.
Dr. Omobola Adu, a Research Analyst at GDL, had this to say: “I think the eNaira is a good initiative in the sense that in the next couple of years, the global economy should be moving to digital currencies. We’ve heard announcements by various countries on plans to start their digital currency, so we can say that the CBN is moving in the right direction.”
Dumebi Udegbunam, Fixed Income trader at UBA, hailed the move by the apex bank as a formidable step as the nation navigates into the 4th industrial revolution.
Dr Adesola Adedutan, the Managing Director of First Bank Nigeria said that there are significant differences between CBDCs and cryptocurrencies, citing that CBDC provides a platform for the governments to leverage blockchain technology to maintain a centralised and institutional role over of the currency.
The eNaira has a low-cost advantage when compared to FIAT. The daily transfers between accounts are at no cost to the a account holder. Lower transaction cost is a massive incentive as traders will pay no fees for withdrawals and deposits to and from their bank account. No transaction fees reduce the cost of commerce while improving safety.
On eNaira’s effect on inflation, experts it would check round up inflation.
For instance, coins in Nigeria are scarce; thus, most merchants round up their prices to match with available currency, usually notes. This rounding up induces an artificial rise in prices because any cost-push does not cause the price hike but other factors, for example, selling eggs for N100 instead of N88. With the e-Naira, it becomes possible to transfer the exact cash price in the marketplace, especially in rural areas. This reduces the possibility of “round-up inflation.”
Some Nigerians expressed hopes that the eNaira brings the benefits to the consumers as stated by the CBN.
Affy Okoh, a civil servant said; “I’m waiting for eNaira. As long as it’s cheaper and safer to transact with it, I welcome it with my whole heart.
“The world is going digital and Nigeria cannot afford to lag behind”.
Abubakar Usman, a trader had this to say: “I don’t know what they are talking about. What is eNaira? My people in the north don’t anything other than cash. The CBN and the banks should educate us seriously on this matter. I’m not ready for it. I want cash”.
Bimbo Adelakun, a student said it was a good development so long as it is safe and secure.
To solidify the anticipated gains of eNaira and banking generally, the CBN Governor, Mr Godwin Emefiele, said that the apex bank will, in the next 12 months, establish the Nigerian International Financial Centre (NIFC) to consolidate the growth and resilience of Nigerian banks in the last decade.
He said the NIFC will act as an international gateway for capital and investments, driven by technology and payment system infrastructure.
“This new financial hub, will curate local and international banks to make them global champions. The NIFC will be a 24/7 Financial centre that will complement London, New York and Singapore financial centers and enable an acceleration of our home grown initiatives such as the Infracorp plc, the N15 Trillion infrastructure fund which we will be launching in October 2021.
“The NIFC will also complement our initiatives on the Nigerian Commodity exchange and the National Theatre creative hubs for our youths as well as the E-naira project which will also debut in October 2021. The NIFC will take advantage of our existing laws such as the BOFIA 2020, NEPZA and other CBN regulations to create a fully global investment and financial hub where monies, ideas, and technology will move freely without hindrance”, Emefiele explained.
