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Nigeria’s digital currency E- Naira: Will it really work in Nigeria?

Nigeria’s digital currency E- Naira: Will it really work in Nigeria?

The central bank of Nigeria announced that they will be launching Nigeria’s Digital currency, dubbed ” E – Naira” by October Ist, her independence day. 

In this article, I will tell you all that you need to know about the  E – Naira. 

What is the E – naira?

The E – naira  is Nigeria’s Digital currency. It is the naira but digital, the  E – naira isn’t a crypto currency but it uses technology for digital currency. Nigeria is partnering with a company called Bitt, Inc. 

Bitt, Inc is Nigeria’s Digital currency provider. 

This digital currency can also be called CBDC, Central Bank digital currency. Just to give you a side gossip, it will interest you to know that Ghana is also on the move to create her own digital currency, digital cedi (DCD) or the e-cedi. 

The E – naira will launch on the 1st of October, a very memorable day in Nigeria’s history, as she marks her independence day. 

This new development has a lot to trace to the crypto currency industry. 

Could it be that Nigeria has a country is competing with the crypto currency industry? 

Here is why this question should be asked. 

In February of 2021, CBN stopped a major link between the bank and crypto currency industry. 

According to the central bank of Nigeria, the cryptocurrency isn’t recognized as money or legal tender, so they sent a circular to the different financial institutions, stating that dealings in cryptocurrency or facilitating payments from cryptocurrency exchange is prohibited. 

Just two months after banning cryptocurrency, the Government of Central Bank announced that Nigeria will be considering its own digital currency, 

I guess that sounds fascinating right? 

Nigeria as a country based on the participation of the citizens, isn’t doing bad in the crypto currency industry. Nigeria holds the number two position in the bitcoin market, that’s in the fast growing global market place of this industry. Noting this, you could tell that CBN could be seeing into the future and the safety of how they generate revenue. One way Nigeria earns from foreign exchange apart from oil is in remittance, when people spend in dollars and other foreign currencies, via that interest rate is generated by CBN, but with bitcoin and the crypto market at large, there isn’t any opportunity for that, because it’s a decentralized currency and technology that is  being used, no third party involvement. So if the crypto currency industry had much influence, then financial institutions would be rendered less useful, although they are predictions of crypto currency in the coming years to over take financial institutions in the world at large. 

The Nigerian Central bank

Significantly the value of the naira is on a downward side of the chart, as dollar keep pushing its mark higher, so currently naira is on $1=#530. 

Who is making the E – naira?

I had mentioned earlier, A company called Bitt, Incorporated is in partnership with central bank of Nigeria in making the E – naira. 

Bitt, Inc is a Barbados based fintech company, that uses block chain and distributed ledger technology, to enable save P2P transaction, with seem less mobile money, their main objectives is to develop payment system for people, company, banks and central banks, using their block chain technology as well. 

According to CBN, bitt, Inc was selected from a highly competitive number of bidders, the number of bidders were over a 100,but they claimed that they have chosen this company due to “tested and proven digital currency experience which is already in circulation in several eastern Caribbean countries”. They also stated that they were chosen because they helped “successfully launch the central bank digital currency (CBDC) pilot of the Eastern Caribbean Central Bank (ECCB) In April 2021.

This deal will have this company register in Nigeria as a limited liability company, and also the central bank of Nigeria will own stakes or shares in their Nigeria company. 

The CBN currently holds shares in some of the other Nigeria financial payment system like (NIBSS), Nigerians interbank settlement system, this could be so this companies don’t have a upper hand in determining the lives of Nigerians. 

What is the E – naira process like?

The E naira process will come in two  groups , first will be the levels of wallet, and then the launch stages. 

For the launch stage, first stage of it is  that the CBN says it will be responsible for the issuing, redistribution and destruction of the E naira currency, in the second stage we have financial institutions coming in, under the license of the central bank of Nigeria, these institutions will be able to issue the digital currency. 

The E naira will have a stable rate, and will not be able to had up interest like cryptocurrency. 

The financial institutions will also manage the currency with its customers, using the KYC, know your customers registration and the AML, Anti money laundering compliance. 

And then in the third stage the Nigeria Government will be more involved with the digital currency, thereby being able to send and receive money across the citizens. The fourth stage will be the merchant, those who are expected to provide low cost payment, business management software, POS and online transactions. The last stage will be the retail consumer processing,  this stage deals with how the digital currency is going to flow, work and tie together like a normal currency. 

For the wallet, because of the deadline limit for the launch, that is October 1st, there will be what is called a speed wallet, this wallet is just to enable the CBN to meet their deadline. 

Now talking about the different wallet levels, the first level allows users with no bank account, to use the speed wallet, however, they will need personal details like name, passport, place of birth, Gender, and phone number. This wallet will have a daily limit of #50,000 for sending and receiving, and the minimum requirement will be a phone number which will be validated with the NIN (national identity number). 

The second level of the wallet will require users to own an account with existing commercial banks, at this level they can send and receive #200,000 daily with a cumulative daily balance of #500,000, meaning that the total transactions you can make daily will be #500,000 regardless of the medium whether sending or receiving. The major requirement will be a BVN (bank verification number). 

The third level will also require a bank account, with a daily limit of #1,000,000 and a cumulative daily balance of #5,000,000,also like the second level, your BVN will be required. And then then you have the fourth level which is also referred to as the merchant level, it allows users to send and receive #1,000,000 daily, however there is no limit to the amount of money you can move within your bank account. The minimum requirements here is also the BVN, however there will be more identification process like KYC, (know your customers), AML (Anti money laundering) and CFT (combating financing of terrorism).

Advantage of the E-naira

It is beautiful to see Nigeria adopt this digital currency, one of the advantage of it, is that it is going to be very fast in regards to payment, it is going to be very cheap as well, for both the CBN and the general users as it will curb the logistic of moving paper currency around even the printing of it. For now the CBN hasn’t stated if they will be a service charge within the use of the wallet, which of course will be advantageous. Also considering the requirements like robots KYC and AML, it therefore guarantees a high level of financial safety to its users. 

Any Disadvantages?

Well considering the control of the E naira, the director of the monitory policy in the CBN says that the CBN will have full control in the beginning, This might or might not affect top payments companies in Nigeria, because basically what they offer can be given via the E-naira wallet. 

Another thing is the data protection. With the e-naira, the personal information of millions of citizens will be in the hands the government and also shared by the private company bitt, inc, that might ring an alarm, but I do hope the CBN has the full positive interest of Nigerians. 

On the other side of the table, is the E-naira a threat to paper currency? 

I don’t think so, the paper currency still has its full grounds down to some very many years in the future, considering some few facts, first is that to access the E-naira, you will need a smartphone, and basically 30% of Nigerians if not more, are without device or might not be able to navigate a smartphone. 

Another thing is this, if the CBN will be ready to push in one third of their financial budget into the E-naira, then we are certain of a competition between the E naira and paper currency, however the E-naira is being created to compliment the paper currency and not to serve as a rival. 

I do trust that you had a good time reading this article, let me know your thoughts concerning the E-naira in the comment section.

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