he Central Bank of Nigeria appears to be on the verge of introducing e-Naira, a new level of financial transaction experience in Nigeria.
The Central Bank of Nigeria stated last week that Bitt Inc., a worldwide Fintech business, has been named as the Technical Partner for its digital currency, which will be unveiled later this year.
According to industry analysts, the CBDC (Central Bank Digital Currency) experiment, also known as ‘Project Giant,’ has been a long and exhaustive process for the CBN, with the Bank’s decision to digitize the Naira in 2017 following significant study and studies. The Central Bank of Nigeria’s move follows a clear global trend in which over 85% of Central Banks are now considering carrying out digital currencies in their nations, due to the rise in the use of digital payments and increase of the digital economy.
Mr. Osita Nwanisobi, Director of Corporate Communications at the Central Bank of Nigeria, said Bitt Inc was chosen from among a number of highly competitive bidders because of its technological competency, efficiency, platform security, inter-operable system, and implementation experience.
“The CBN will rely on Bitt Inc’s tried and proven digital currency experience, which is now in circulation in numerous Eastern Caribbean countries,” he says.
The ECCB’s (Eastern Caribbean Central Bank) CBDC trial, which was developed and launched successfully in April 2021, was another source of confidence in the Bitt Inc. relationship.
The following are some of its characteristics:
According to the CBN, the digital money would have parity of value and will not pay interest.
The CBN described many design aspects of the digital money in a sensitization document given to commercial banks across the country.
Nigeria’s digital currency will, according to the document, coexist with the country’s fiat currency, with the CBN in charge of issuing, distributing, and redeeming the digital money, as well as other monitoring and management tasks.
Nigeria’s digital currency will operate under a tiered AML (Anti-Money Laundering) and KYC (Know Your Customer) structure with varying transaction restrictions, according to the sensitization document.
Citizens without a bank account will be required to disclose their national identity-linked phone numbers for verification at the bottom of the AML and KYC pyramid, according to reports. A daily transaction restriction of N50,000 would be imposed on users in this category.
Citizens having bank accounts may be assigned to the second or third levels, based on how many AML/KYC processes they have completed. The daily limitations will be N200,000 and N1million for these two categories, respectively.
In addition to the BVN (Bank Verification Number), users of the third tier will very certainly be required to pass a physical AML and KYC verification process.
Merchants will be subject to the same N1 million limit as tier three users, but they will have no limits on the amount they can send to their bank accounts.
This demonstrates the CBN’s intention to provide fee-free transfers between e-Naira wallets and bank accounts for a variety of transactions. The zero-fee arrangement is most likely a way to encourage the public to use the digital currency, especially given the high transaction costs attached with digital/mobile in the country.
The CBN document also included possible process flows for IMTOs (International Money Transfer Operators) and the projected e-Naira, indicating that the digital currency would be integrated with the CBN’s foreign exchange, or Forex, control procedures.
e-Naira’s alternative usage includes:
The first option offered by the Apex Bank is for the Central Bank of Nigeria to provide e-Naira credit collateral to International Money Transfer Operators through their banking partners in the country. A second approach would be for the IMTO accounts to be pre-funded by the Central Bank of Nigeria to, although this method could expose the Central Bank of Nigeria to severe exchange rate risk.
The CBN’s third alternative is to use the e-Naira, which will work in the same way as the present Forex system, with abroad remittances being paid out in digital currency by the beneficiary in Nigeria.
How to transact with the e-Naira:
To transact with the e-Naira, customers must install the speed wallet first on their device, then verify their account on the platform via their mobile phone number, NIN (National Identity Number) provision, or BVN (Bank Verification Number). Users can start using the wallet after this is completed. Users will be able to transmit money through P2P (Peer-to-Peer) transactions through their wallets to other wallet holders, as well as Person-to-Business or Person-to-Merchant transactions, in which e-Naira users can pay for goods to businesses who use the e-Naira wallet and vice versa.
The Nigerian Central Bank is set to launch the e-Naira:
According to reports, the CBN may execute a proof of concept for the Nigerian half of the pilot project in October, implying that preparations for public involvement and use of digital currency in Nigeria are nearly complete.
Infrastructure for integrated technology:
Isa Ali Pantami, Nigeria’s Communications Minister, had connected the Government’s attempts to encourage blockchain adoption as a vital aspect of digital innovation in Nigeria earlier in June 2021. This means that the e-Naira will be able to run smoothly on the country’s composite information technology infrastructure, which will cover almost all elements of national life.
The CBN’s Director of IT, Rakiya Mohammed, has been discussing the e-Naira’s guidelines and characteristics.
When she indicated the e-Naira will run on a blockchain technology called the Hyperledger Fabric, she was confirming Pantami’statement.
The e-Naira has the following advantages:
Cross-border trade, quicker financial inclusion, and cheaper and faster remittance inflows are among the expected benefits, as mentioned by CBN Governor, Godwin Emefiele.
Others include better monetary policy efficacy, payment system efficiency, and tax collection, as well as more targeted social interventions.
The e-Naira will benefit as well, as it will facilitate government remittances.
After the e-Naira has been widely adopted, the Central Bank Of Nigeria will present to banks in Nigeria on how government MDAs (Ministries, Departments, and Agencies) will be onboarded and use the e-Naira to make payments to their staff and the general public, as well as how citizens can make remittances to MDAs using the e-Naira.
The CBN’s cashless agenda will be easier to implement with the e-Naira.
Long-term, there will be less need to print money. As more individuals use the CBDC as a form of payment, the demand for paper money will decline, and the government will be able to spend less on printing because new coins or e-Naira can be quickly issued using the Hyperledger Fabric Blockchain.
Between 2014 and 2019, the Central Bank of Nigeria spent a total of 307 billion on printing banknotes, according to data from the Currency Operations Department’s Annual Report.
Furthermore, financial fraud cases can be easily traced because the government would be able to follow the flow of money in and out of the country because it is transparent and forging it is as hard as it can get.