eNaira - Yay or Nay?

Proshare

Wednesday, September 08, 2021 / 8:38 AM / by Coronation Merchant Bank / Header Image Credit: Business Post/Ecographics


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.

 

We 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 e-wallets to other wallet holders and person-to-merchant/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.

 

Related Video

  1. CIBN Hosts Discourse on Blockchain Tech in Nigeria - Feb 28, 2017


Proshare Nigeria Pvt. Ltd. 


Related News - Digital Assets

1.       Legally Speaking, is Digital Money Really Money? - Jan 14, 2021

2.      Ghana Launches World's First Digital Finance Policy Amid COVID-19 - Jan 08, 2021

3.      Banks and Thrifts May Participate in INVN and Use Stablecoins for Payment Activities - Jan 05, 2021

4.      IOSCO Publishes Report on Education of Retail Investors Regarding Risks of Crypto-Assets  - Dec 24, 2020

5.      How Central Banks Can Catalyze Financial Inclusion Through Digital Currency - Oct 16, 2020

6.      Regulation of Cryptocurrency and Digital Assets In Nigeria: New Beginnings - Oct 15, 2020

7.      Stakeholders Call for Clarity in Regulation and Standardization of Nigeria's Digital Asset Market - Sep 28, 2020

8.     Digital Assets Classification Aimed at Investor Protection - SEC - Sep 21, 2020

9.      SEC Nigeria Issues Statement on Digital Assets, Their Classification and Treatment - Sep 14, 2020

10.  China Starts Major Trial of State-Run Digital Currency - Apr 30, 2020

11.   Analysts Discuss Blockchain Technology and Regulation of Digital Assets in Nigeria - Nov 18, 2019

12.  Winds of Change: The Case for New Digital Currency - Nov 15, 2018

13.  Barclays Files Two Digital Currency and Blockchain Patents with U.S. Patent Office - Jul 21, 2018

14.  Saudi Arabia Capital Market Authority Warns Investors Against Digital Currency Investment - Feb 13, 2018

15.  Distributed Ledger Tech Solutions For Settlement Of Payments Using Central Bank Digital Currency - Oct 13, 2017

16.  China Is Developing its Own Digital Currency - Mar 04, 2017

17.   Sweden’s Central Bank Considers Issuing A Digital Currency - Nov 16, 2016

 

Proshare Nigeria Pvt. Ltd. 

 

Related News - BlockChain & Cryptos

1.       CBN Selects Technical Partner for Digital Currency Project

2.      CBN Targets October 1 for Digital Currency Launch

3.      6 Drawbacks of Cryptocurrency and How You Can Work Around It

4.      Top High Pay Crypto Jobs in Nigeria - Alternative Ways to Earn with Crypto in the Bear Market

5.      Lagos Blockchain and Crypto-Arts Conference 2021

6.      Digital Wallet Opportunities in Middle East and Africa: A Whitepaper by Omdia, in Partnership

7.      Monetary Authority of Singapore and Banque de France Report Success from CBDC Experimentation

8.     The Launch of the Digital Naira and its Likely Impact

9.      The Changing Face of Finance, A New System Beckons

10.  Top Five Microcap Crypto Projects in 2021

11.   How Does Blockchain Technology Work?

12.  The Cryptocurrency Frenzy: A Call for Caution

13.  Bitcoin Price Crash: Is This the End of the Bitcoin Bubble?

14.  Most Important Things You Should Know About Bitcoin

15.  Central Bank of Portugal Grants First Crypto Exchanges Operating Licenses

16.  Things You Need to Consider Before Using Crypto Signals

17.   CBN to Launch Digital Currency Before December

18.  E-Cedi: Bank of Ghana to Pilot Digital Currency

19.  Digital Currency: A Right Move to be Adopted by the CBN?

20. Why Bitcoin May Speed Up the Transition to Renewable Energy

21.  Potential of Blockchain for Financial Inclusion in Nigeria

 


Proshare Nigeria Pvt. Ltd. 

 

Related News - Monetary Policy

1.      Is the Economy Spiraling? - LBS Executive Breakfast Session - February 2021

2.      Total Value of Capital Importation into Nigeria Stood at US$1,069.68m in Q4 2020 - NBS

3.      Rebasing Nigeria's GDP: New National Accounts, More Services

4.      Diaspora Remittances in Nigeria: Examining the New CBN Policy (2)

5.      Diaspora Remittances in Nigeria: Examining The New CBN Policy (1)

6.      Inflationary Pressure Still Straining Pockets

7.      CBN Deals the House Card as Policy Rates Remain Unchanged

8.      CBN Communique No. 134 of the MPC Meeting - Jan 25-26, 2021

9.      MPC Holds All Policy Parameters at the End of Its First Meeting in 2021

10.  Monetary and Interest Rate Policy in 2021: Going for Growth

11.  CBN to Sustain Expansionary Monetary Policy Till Q1, 2021 - Cordros Securities

12.  Ten MPC Members, One Shared Outlook

13.  Personal Statements By The MPC Members At The 133 MPC Meeting of Nov 23-24, 2020

14.  CBN Rolls the Dice to Tackle Market Liquidity and Dollar Dearth

15.  Implications of CBN's Introduction of Its Special Bills to the Market

16.  CBN Introduces Special Bills to Deepen the Financial Markets, An Additional Liquidity Mgmt Tool

 

 

Proshare Nigeria Pvt. Ltd. 

 

Related News - New Rules & Regulations in Nigeria Capital Market

1.       Crowdfunding Rules and Regulations in Nigeria Released by SEC

2.       Collective Investment Schemes General Rules and Regulations in Nigeria Released by SEC

3.       Nominee Companies Rules and Regulations in Nigeria Released by SEC

4.       Fund Management Products Rules and Regulations in Nigeria Released by SEC

5.       Payment of Administrative Charges Rules and Regulations in Nigeria Released by SEC

6.       Annual Supervision Fees for CIS Rules and Regulations in Nigeria Released by SEC

7.       Sundry Amendment to Valuation Report Rules and Regulations in Nigeria Released by SEC

8.       Sundry Amendment to Amount to be Underwritten Rules and Regulations in Nigeria Released by SEC

9.       Investment by CIS in Unlisted Securities Rules and Regulations in Nigeria Released by SEC

10.   Sundry Amendment to Contents of a Trust Deed Rules and Regulations in Nigeria Released by SEC

11.   Steps on Unclaimed Dividend Retrieval Process as Highlighted by SEC Nigeria

12.   SEC Requests CMOs to Disclose Security Dealings of 500,000 Units Within 24hrs of Activity

13.   Revision of Stamp Duty on NSE Transactions to 0.08% from 0.075% Effective 7th December 2020

14.   SEC Proposes Amendment to Its Rule on Renewal of Registration by CMOs

15.   SEC Issues Pre-Notice on Withdrawal of Certificates of Registration of 157 Inactive CMOs

16.   SEC to Discontinue the Practice of Issuing Prior Approval for Audited Accounts of CIS

17.   IOSCO Publishes Report on Education of Retail Investors Regarding Risks of Crypto-Assets 

READ MORE:
Related News
SCROLL TO TOP