Nigeria’s central bank digital currency (CBDC) otherwise referred to as the eNaira which is a culmination of several years of research work in advancing the boundaries of the payments system in order to make financial transactions easier and seamless for every strata of the society, has finally come to stay.
The digital currency launch is the first by an Africa’s country.
The confidence with which the eNaira was launched showed the importance of balancing between innovation and stability.
Accordingly, the eNaira would increase remittances, foster trade, improve financial inclusion and enable welfare payment to make the government more fluid.
Experts have said that adoption of the eNaira would also improve economic activities and increase the country’s gross Domestic Product (GDP) by $29 billion over the next 10 years.
According to the CBN, the eNaira therefore marks a major step forward in the evolution of money and it is committed to ensuring that the eNaira, like the physical Naira, is accessible by everyone.
Understanding the eNaira
When the idea of having a digital currency for Nigeria was first announced, skeptics said it could not work. However, this has given way to optimism as it continues to gain acceptance among Nigerians.
The eNaira is a central bank digital currency (CBDC) backed by law, the full sovereignty of Nigeria, issued by the Central Bank of Nigeria as a legal tender. It is the digital form of the Naira and is used just like cash and it has an eNaira wallet that holds the eNaira. The eNaira wallet is similar to a bank account and is created in the same way; however, it will be a separate account that is not connected to an already existing bank account. Transactions will be possible between two parties that both have an eNaira wallet, which allows you to store, send, and receive eNaira.
Unlike Bitcoin which is a crypto-currency, the eNaira is a digital currency issued by the government. And it will maintain the same value like the Naira.
The fear among many is that as a digital currency, they may lose all of their money, but that is not the case with the eNaira as it is a digital form of cash and it is a direct liability on the Central Bank of Nigeria while customer deposits are direct liabilities on the financial institutions.
One thing is certain and that is the benefit that comes along with the use of Nigeria’s digital currency. Experts say the eNaira will promote and facilitate financial inclusion; enable direct welfare disbursements to citizens; facilitate Diaspora remittances; improve the availability and usability of Central Bank money; increase revenue and tax collection, as well as support a resilient payment system.
Unlike the offline payments channels like agent networks, USSD, wearables, cards and near field communication technology, the eNaira would give access to financial services to underserved and unbanked segments of the population through its innovative products and services thereby promoting further development of the country’s burgeoning Fintech ecosystem.
The eNaira is also expected to significantly reduce the huge amount spent by the banking sector regulator to print cash.
A look at the CBN website showed that the Apex Bank spent the sum of N58.618 billion, N75.523 billion and N64.040 billion to print Naira notes in 2020, 2019 and 2018, respectively.
Speaking at the grand finale of the eNaira Hackathon in Abuja, the deputy governor in charge of Economic Policy at the CBN, Kingsley Obiora, said the eNaira will further reduce the use of cash.
He said: “In Nigeria too, we are also seeing the same decline in the use of cash, the minting of currencies in the CBN has been reducing in the last couple of years, so alongside this reduction in the use of cash has also been an explosion in electronic business and e-business and we have seen the value of e-business grow from N393 billion in 2014 to about N2.4 trillion now and so if you look at this movement, you will realise that the central banks in the world are responding to yearnings of citizens which is why citizens in 96 per cent of central banks in the world are either working on digital currencies or they have done so already.”
Making eNaira work
In a bid to encourage acceptability and allay the fear of skeptics, the CBN introduced guidelines that would simplify the use of the eNaira. It is expected to also encourage general acceptability and use, promote low cost of transactions while minimising inherent risks of disintermediation or any negative impact on the financial system.
Part of the thinking of the CBN was to make transaction charges for the first 90 days after the launch of the platform free. After this period, applicable charges as outlined in the Guide to Charges by Banks, Other Financial and Non-bank Financial Institutions will become effective.
As at 15 April 2022, the eNaira has recorded over 840,000 downloads, with about 270,000 active wallets comprising over 252,000 consumer wallets and 17,000 merchant wallets with over 200,000 volumes of transactions worth N4 billion so far transacted since the platform went live October 2021.
Part of what the Apex Bank also did was to create different wallets for different stakeholders.
According to the CBN, while the eNaira wallet belongs solely to CBN where it shall warehouse all minted eNaira, financial institutions were expected to maintain one treasury eNaira wallet to warehouse eNaira received from the CBN eNaira stock wallet. This subwallet, the Bank says, shall be funded from the eNaira wallet treasury.
“eNaira Merchant speed wallets shall be used solely for receiving and making eNaira payments for goods and services. eNaira speed wallets shall be available for end users to transact on the eNaira platform.”
To ensure security of funds, the eNaira is expected to have two-factor authentication and other measures.
Meanwhile, daily transaction limits for Tier 0, which is just a phone number without a verified National Identity Number, was set at N20, 000 with a balance limit of N120, 000.
Tier1 category, which has a verified number, has a N50, 000 transaction limit and N300, 000 balance limits.
Tier2 and Tier3 categories have daily transaction limits of N200, 000 and N1 million as well as a N500, 000 and N5 million balance limits while merchants have no limit.
In his keynote address at the grand finale of the eNaira Hackathon in Abuja recently, the CBN governor, Godwin Emefiele, said the event is another forward leap by the Central Bank of Nigeria in the implementation of eNaira, to ensure all Nigerians receive the full benefits of a central bank digital currency.
With the record number of interest from young and innovative Nigerians totaling 4,667 registrations, comprising 4,082 male and 582 female applicants, the eNaira hackathon has further shown that Nigerians, both within and outside the country, possess innovative ideas and are willing and ready to leverage on exciting opportunities that the eNaira presents for enhancing digital financial services and contributing to national development.
The CBN boss said the eNaira hackathon would provide solutions that would drive financial inclusion, SME growth and the creation of start-ups; facilitate cross border trades and transfers as well as international remittances and FX exchanges; effective implementation of welfare-inclined government programs; and enhance efficiency in the interbank market.
“Therefore, today’s event is targeted at providing an engagement with critical stakeholders in the financial technology space to deepen the link between eNaira and Fintechs,” Emefiele said.
An expert’s take
An economist, Adefolarin Olamilekan, said the eNaira is an innovation and dynamic platform by the CBN that will help it achieve its financial inclusion objectives in the country.
He noted that the eNaira is a globally recognized medium that has come to stay to boost trade and exchanges, sales and marketing with ease and access at the same time.
According to him, the eNaira is a timely response from the apex bank to recent global financial trends.
However, Olamilekan, noted that endearing Nigerians to the eNaira would require firstly, developing youth friendly features like games, sport and lottery would go a long way.
“We believed the eNaira apart from targeting financial inclusion should also be a deliberate policy and platform fit for the youthful population considering they are internet savvy.
“Secondly, the role of the media cannot be over-emphasised when it comes to informing and educating Nigerians on the benefits of using the eNaira. Therefore, strategic media campaigns across the country are key with benefit spells out in major national languages.
“Lastly, ensuring the platform Internet and network service are top notch is important. This would guarantee users confidence and assurance,” he said.
Source : From the Web