Monday, November 15, 2021/11:30AM / By Isa, Oluwatoba, & Jesutooni of Banwo & Ighodalo /
Header Image Credit: Rave Online
Introduction On October 25, 2021, the Central Bank of Nigeria ("CBN"), Nigeria's apex financial and monetary regulator, issued a governing framework for the administration of the eNaira in Nigeria. The eNaira is the digital form of the Fiat currency (Naira) issued by the CBN, and it will be exchangeable with the digital currencies of other Central Banks (CBDC). Like the physical/paper Naira, the eNaira is a legal tender and forms part of the currency-in-circulation. it is created to complement cash as a less costly, more efficient, generally acceptable, safe and trusted means of payment and store of value.
Titled Regulatory Guidelines on the eNaira (the "Guidelines"), the governing framework, which came into operation the very day it was issued, creates the eNaira Platform for the proper, efficient and safe management of the digital currency system in the country. It also, among other key matters, identifies the key participants in the Nigerian digital currency system and their roles, principal features, nature of transactions, documentation requirements and other key considerations that will guide all stakeholders dealing in the eNaira, including the CBN; Financial Institutions; Merchants; Ministries, Departments and Agencies (MDA); and Consumers (end-users). In order to access, use and hold eNaira, an end-user is required to have an eNaira wallet.
This article provides a synopsis of the key provisions of the Guidelines
Participants on the eNaira Platform
Transaction Types and Charges Structure on the eNaira Platform
AML/CFT Compliance on the eNaira Platform
Complaints by consumers/end-users arising from the usage of the eNaira, are to be referred to the end-users' preferred FI Helpdesks. If unresolved, such consumer complaints are to be escalated to the eNaira helpdesk. Similarly, complaints from financial institutions or disputes arising between financial institutions are to be reported to the eNaira Helpdesk Team and resolved within two (2) working days.
In cases of disputes where one or both parties are unsatisfied with the resolution, the issue shall be referred to an arbitration panel, as provided under the extant Arbitration and Conciliation Act or as may be defined by the CBN from time to time.
Other key provisions under the Guidelines include the requirement for FIs to create a framework, policy documents, and governance structure to ensure Sound Risk Management based on their operations of the eNaira platform. Also, the Guidelines provide that 2-factor authentication shall be in place on the eNaira platform, as a means of safeguarding the Security and Privacy of participants. There are also extensive provisions on the responsibilities of Banks and Wallet users in the case of loss, compromise, or theft of a user's device/access to the eNaira platform, as well as additional reporting requirements for FIs.
Remarks The introduction of the eNaira by the CBN, demonstrates a growing shift of central banks and national reserves towards the adoption of digital currencies globally. The CBN is empowered under the CBN Act, 2007 and the Banks and Other Financial Institutions Act (BOFIA), 2020 to issue legal tender currency, ensure financial system stability, and promote the development of electronic payments system in the country. Being a digital currency stored in a digital wallet and that operates on a peer-to-peer system, the eNaira bears some semblance to cryptocurrencies. However, the fact that the eNaira is a fiat money issued and controlled by the CBN and backed by Government guarantee, makes it fundamentally different from cryptocurrencies. Unlike the eNaira, a cryptocurrency is a decentralized digital currency that is not issued by any central authority, and which exists outside the control of a government. This notwithstanding, the emergence of the Guidelines is likely be seen by many as a precursor to the development of a legal and regulatory framework for the adoption of cryptocurrencies in the Nigerian Payments System.
We note that the introduction and use of the eNaira have the potential to boost electronic payments in Nigeria exponentially and attract more investments into the Fintech space. While we are still observing the possible market impact of the eNaira on the business of stakeholders, like commercial banks and card payment processors, it is likely that the adoption of the eNaira will continue to deepen the popularity of contactless and micro payments in the Nigeria's payments landscape. In particular, we are inclined to agree with the CBN that the new digital currency regime will (i) improve the availability and usability of Central Bank money, (ii) support a resilient payments system ecosystem, (iii) encourage financial inclusion, (iv) reduce the cost of processing cash, (v) enable direct welfare disbursements to citizens, (vi) increase revenue and tax collection, (vii) facilitate Diaspora remittances, and (viii) reduce the cost and improve the efficiency of cross-border payments.
Further, we see the emergence of the eNaira as part of the CBN's efforts at rejigging its development strategy for the payments system, now tagged the Payment Systems Vision 2025 (PSV-2025). It is expected that the evolving disruptions of the financial system through application of blockchain technology and artificial intelligence (AI) by Fintech companies, will enhance financial inclusion, electronic banking/ payments and the use of alternative banking channels (otherwise known as the "Cashless Policy"), as well as the other core objectives of the PSV-2025.
Recent Articles By Banwo & Ighodalo
1. Trademarking "Yoruba": Illegality or Mere Cultural Appropriation? - July 07,2021
2. Trademark Licensing in Nigeria - May 06, 2021
4. COVID-19 and Commercial Transactions: Some Emerging Legal Issues - March 30, 2020
5. Patents: The Fitness and Wellness Industry - October 23, 2019
6. Ownership of Trademarks in Nigeria - October 06, 2019
7. Companies Operating In Nigeria To Pay 0.005% Net Profit Levy Under The NPTF (Establishment) Act 2018 - September 17, 2019
8. NAFDAC-Regulated Products Imported Into Nigeria Now To Be Processed On The Nigeria Trade Portal - September 06, 2019
9. National Identity Management In Nigeria: NIMC and Matters Arising - Jul 29, 2019
10. Drilling Rigs Are Not Vessels: Court Of Appeal Pronounces - Jul 25, 2019
Senior Practice Support Lawyer
Practice Support Lawyer
The Grey Matter Concept is an initiative of the law firm, Banwo & Ighodalo.
DISCLAIMER: This article is only intended to provide general information on
the subject matter and does not by itself create a client/attorney relationship
between readers and our Law Firm or serve as legal advice. We are available to
provide specialist legal advice on the readersâ€™ specific circumstances when