Below is all you need to know about Nigeria’s Digital currency, eNaira
Gatekeepers News reports that eNaira is a Central Bank Digital Currency (CBDC) issued by the Central Bank of Nigeria (CBN) as a legal tender. It is the digital form of Nigeria’s Naira which will be used just like cash.
It will be a digital representation of the paper Naira currency issued by the CBN, which will serve as a “complementary” legal tender in the country. It will have the same exchange value as the Naira and maintain a “parity of value” with the Naira.
The e-Naira which will not earn any interest to holders is built on a blockchain open ledger technology. This means it cannot have a duplicate or fake eNaira as each eNaira note will be unique.
What is an eNaira wallet?
The eNaira wallet is a digital storage which is required to access, hold and use the eNaira. It is held and managed on a distributed ledger.
Is eNaira Different From The Money In Bank Account?
eNaira being the digital form of cash is a direct liability on the Central Bank of Nigeria while the customer deposits are direct liabilities on the financial institutions.
Is the eNaira a Stable coin?
A stable coin is a cryptocurrency backed by reserves. What does this mean? Stable coins are backed by holding an equal equivalent of FIAT (government-issued but usually not backed by any commodity, e.g., gold) money like the US dollar. Thus a stable coin like USDT is tied to a currency, the US dollar, which maintains (not immovable) exchange value.
However, the eNaira is technically linked to the FIAT Naira. There goes the question: is the Naira stable? Well, not exactly. To be a stable coin, the eNaira has to be tied to a currency like the US Dollar or Euro or even China’s Yuan.
Is the e-Naira safe?
The eNaira is designed to solve verification risk as all holders are assured that each eNaira is a valid token. This authenticity is achieved by building the eNaira on the blockchain. This, every retailer is more likely to accept the eNaira because it can’t be easily faked.
How to get the eNaira?
The apex bank has planned a rollout in a tiered manner. Firstly CBN will issue the e-Naira, to financial institutions like commercial banks. The bank will then retail the e-Naira to their customers. However, a customer does not need a bank account to get the eNaira if his/her transaction value is less than N50,000 a day, as he/she can use a NIN verified phone number to buy eNaira.
In addition, if a customer wants to withdraw more than N50,000 but up to the daily limit of N1 million, then he/she will need a BVN in addition to a NIN verified phone number. The apex bank has very strict ‘Know Your Customers” protocols for this process, whose aim is to assure all retailers of the safety and utility of the eNaira.
Usages of eNaira
Compared to FIAT, the eNaira has a low-cost advantage. The daily transfers between accounts are at no cost to the holder of the account. 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.
How will dollar remittance to eNaira work?
The e-Naira 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 e-Naira directly to the International Money Transfer Organisation (IMTO). A Nigerian abroad sending $100 to his wife, can debit his US bank account and credit $100 to an IMTO, who will buy eNaira from any corresponding Nigerian bank, which is instantly converted to e-Naira at a far lower transfer fee which is a real benefit and a significant advantage the e-Naira will enjoy.
What about inflation?
With the e-Naira, customers can transfer the exact cash price in the marketplace, especially in rural areas, thereby reducing the possibility of “round-up inflation.”
Can eNaira be the ECOWAS currency
The eNaira can be used by any two parties who can credit a Nigerian banking institution with corresponding currency. This means a trader banking with a Nigerian bank can settle his import bills from ECOWAS country using e-Naira. This will be the next level of the rollout.
The eNaira helps the financially excluded
The e-Naira will also bring in the vast majority of the unbanked Nigerians who have no bank account but have a phone in the formal financial economy. With the e-Naira, salary payments and payments for goods and services can be concluded. A plumber can accept payments on his phone, store them in his wallet, and make transactions with any vendor.
Is eNaira safe?
Data security. The risk of malicious actors attempting to hack or gain access to the e-Naira data is low since it’s an online platform. The information from the BVN and NIN is also online. The process of minting and burning eNaira tokens by the CBN has to be top-notch.
In all, the eNaira is a plus to the Nigerian economy, and a positive progression towards a cashless society, with lower costs, and higher productivity.
