E-Naira: Requirements as CBN launches Nigeria’s digital currency by October 1st 2021

In June 2021, the Central Bank of Nigeria (CBN) announced plans to launch a digital currency dubbed the ‘e-Naira’ by October 2021, joining 81 countries strongly considering digital currencies. What are the requirements and gains of joining the e-naira train? See details below.

E-Naira: Requirements as CBN launches Nigeria’s digital currency by October 1st 2021

The Central Bank of Nigeria (CBN) will launch a digital currency, e-Naira in October to coincide with the nation’s independence anniversary. The CBN’s decision followed two years of contemplation on digital currency technology. Additionally, the CBN’s intention to achieve 80% financial inclusion by the end of 2021 is another motivation to launch digital money.

What is Digital Currency? 

Digital currency is the electronic form of fiat money issued by governments. However, many confuse it with cryptocurrency which is a store of value secured by encryption.

The central bank of a country supervises digital currency. Cryptocurrencies are not regulated by any government, reason why authorities warn against bitcoin, ethereum and the likes.

According to The Atlantic Council, more than 80 countries are now exploring a CBDC against 35 countries in May 2020.

The American think tank says China – which banned crypto dealings – is ahead, allowing foreign visitors to use digital yuan if they provide passport information to the People’s Bank of China,

The Bahamian Sand Dollar was the first CBDC to become widely available; over 14 countries are in the pilot stage while 5 have fully launched.

They are the Bahamas, Saint Kitts and Nevis, Antigua and Barbuda, Saint Lucia, and Grenada.

What is E-naira?

In 2017, the CBN took the decision to digitize the Naira, following the rise in the use of digital payments and acceptance of the digital economy. The e-Naira would only exist in digital and electronic form. Individuals and financial institutions can track transactions easier. So the e-naira is a form of digital currency Nigeria wants to venture into from October 1st, 2021.

Paraphrased dynamics of e-Naira
The e-Naira has been proposed to take effect on October 1, 2021. The process starts with your commercial bank which is expected to send your account details to the CBN. On receipt of your account details, it generates a CBDC code for you that will enable you to maintain an account directly with it. This account opened for you by CBN will be tied to your commercial bank account and will be called “Wallet”. So you will maintain your wallet with CBN alongside your existing account with your commercial bank, for now, to enable the CBN to meet the October 1 deadline. Once this is done, you can then start to transact.

Your first transaction will involve moving a certain sum to your wallet from your commercial bank. You will not earn any interest on this sum in your wallet as it is not for investment purposes but for transactions. In utilising the balance in your wallet, you can pay for goods and services using familiar channels of POS etc. You can transfer to the wallet or commercial bank accounts of individuals (friends, relatives, etc.). When you do not need it in the wallet, you can transfer the balance back to your commercial bank account. This opportunity is opened to people that have never opened accounts with any bank in which case when they do and upon providing their NIN, their single transaction cannot exceed N50,000 and daily total, not more than N300,000. It is also opened to people who already have an account and have BVN but minimal KYC in which case they can do up to N200,000 in a single transaction and a total of N500,000 daily. Individuals with full KYC and BVN will be able to transfer or receive N1m in a single transaction and a total of N5m per day. Businesses are not excluded in which case they can send and receive N1m in a single transaction and a no-limit for daily transactions. 

Requirements and Applications for e-naira

* All prospective holdersmand traders of the e-naira must use it for legitimate purposes only.

* Existing Bank account holders in Nigeria will be converted and a e-wallet created by your respective bank upon request.

* Your bank account must have a BVN that is link to that account.

Gains of the e-naira

1. Users would be able to transfer existing funds in bank accounts to their digital currency account.

2. e-Naira is expected to help Nigerians create new business opportunities, financial products and services, reduce the cost of operations and cash management.

3. The digital currency would be implemented through a two-tiered model to enable a structure that allows public-private partnerships.

4. The CBN will design the e-Naira but disseminate it through regulated financial institutions. They would provide digital cash to persons and businesses.

While there is much information about this digital currency which is soon to be launched, below are six things you should know about the nature of this innovation: 

It is purely digital.

The e-Naira would be a Central Bank Digital Currency (CBDC) which means that while it is regulated by the CBN, it is a token that would only exist in digital and electronic form.

It is universally transferable.

The CBDC would be eligible for local and international transfers with little to no time lag and cheaper transaction fees than physical currencies. Also, it would allow you to transfer existing funds in your bank to your digital currency account.

It has a myriad of economic advantages

With the e-Naira, Nigerians can engage in easier cross-border trade, as well as enjoy a cheaper and faster inflow of remittances. Also, a digital currency would provide more financial opportunities for Nigerians as they would be able to create new business opportunities and financial products and services. 

According to the CBN, another perk of the e-Naira is a reduction in the cost of operations and cash management. It would also leave a clearer footprint of digital transactions, making it easier for financial institutions to track transactions.

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Financial Institutions would still be relevant

The digital currency would be implemented through a two-tiered model which would enable a structure that leaves room for public-private partnership. Just like the physical currency, the CBN will design the e-Naira but disseminate it through regulated financial institutions, which would then provide digital cash to individuals and businesses.

It’s not a Cryptocurrency

While all cryptocurrencies are digital currencies, it is important to note that not all digital currencies are cryptocurrencies. The e-Naira would be regulated by the Central Bank of Nigeria, but cryptocurrencies are not regulated by any government.

Implementation is on track

A recent development in the process of implementing digital currency is the selection of a technical fintech partner, Bitts Inc. After a thorough selection process, as prescribed by the Nigeria Public Procurement Act, Bitts Inc. emerged as a partner to the CBN for this innovative project.

Bitts Inc. prioritises the creation of payment systems that ensures an increase in social inclusion, financial inclusion and overall sustainable economic growth; the excellence in their operation methods has earned them acknowledgment from the Bretton Woods Institutions – IMF/World Bank. This is one of the reasons the CBN enlisted them for this crucial exercise.

Also, the company was the first fintech to digitize a national currency on a blockchain by creating a synthetic CBDC with the support of the Governor, Central Bank of Barbados and the country’s Minister of Finance.

As Nigeria counts down to her 61st Independence Day celebration, citizens can look forward to the start of a digital era where the CBN prioritises making financial operations more citizen-centric.

Thank you.

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