eNaira
The eNaira is the Nigerian digital currency that is issued and regulated by the Central Bank of Nigeria.
Nigeria recently became the first African country to introduce a digital currency. It joins the Bahamas and the Eastern Caribbean Central Bank in being among the first jurisdictions in the world to roll out national digital currencies. The objective of the eNaira is to aid financial inclusion, improve payment efficiency, improve revenue and tax collection, targeted social interventions, amongst other objectives.
A digital currency is a means of payment or money that exists in a purely electronic form. Central bank digital currencies are issued and regulated by the nation’s monetary authority, or central bank, and backed by the government. They are different from existing electronic central bank money, which is provided by central banks but can only be used by banks and selected financial institutions.
The Bahamas, Saint Lucia, Grenada, Antigua and Barbuda are among the seven countries that have launched central bank digital currencies.
What are CBDCs and how do they compare to cryptocurrencies?
Will the eNaira be connected with existing bank accounts?
Can the government monitor transactions with the eNaira?
Why has Nigeria launched a digital currency?
What are the risks and how can they be mitigated?
Diverse Possibilities Of Payment Experience.
How to get started
What are CBDCs and how do they compare to cryptocurrencies?
CBDCs are digital currencies issued by the government. While they might share similarities with cryptocurrencies — running on a Blockchain for example — they’re not necessarily cryptocurrencies.
Will the eNaira be connected with existing bank accounts?
No, the eNaira will be created independently of bank accounts. The wallets will be created by financial institutions that will create customer identification through Application Programming Interfaces (API).
Can the government monitor transactions with the eNaira?
Yes, the government can monitor all eNaira transactions on the Hyperledger Fabric Blockchain.
Why has Nigeria launched a digital currency?
To:
· promote and facilitate financial inclusion
· enable direct welfare disbursements to citizens
· facilitate diaspora remittances
· reduce the cost of processing cash
· improve the availability and usability of Central Bank money
· increase revenue and tax collection
· support a resilient payment system
· improve the efficiency of cross-border payments.
What are the risks and how can they be mitigated?
One is its potential to disrupt existing banking systems. This could occur if citizens decide to hold digital currency instead of keeping their physical Naira in a bank account. This would mean that banks would not have money to grant loans and other financial products. It could result in banks raising their interest rates as an incentive for customers to keep deposits within the banks. But then interest charged on loans would also go up to cover interest on savings.
However, since the eNaira is non-interest bearing and the Central Bank can place transaction and balance limits on certain eNaira wallets, this risk is minimised.
The second risk is operational. For example, if IT systems were to fail or if there were technological glitches, or cyber-attacks. These can compromise user privacy. The Central Bank has robust technology and IT security systems.
Closely linked is reputational risk to the Central Bank if the operational risks materialise. They are likely to have a huge impact on its credibility and reputation both domestically and globally.
A possible way to lighten this burden is through creating synthetic central bank digital currencies. This idea was put forward in 2019 in an International Monetary Fund paper. In such a system, the central bank does not directly manage the system, but outsources tasks to private institutions. Financial institutions issue the digital currency, which is fully backed by central bank money.
Closely linked is the risk of the system being used to launder money and finance terrorism. Financial institutions would need strong systems for combating these threats, supported by national legal infrastructure.
Another risk is around data protection and privacy. The Central Bank claims that the eNaira system is built with deep considerations around privacy and data protection and in compliance with the National Data Protection Regulations.
However, as the system is designed in line with the guidelines to prevent the illicit flow and use of funds which require identifying transacting parties and the details of their transactions, proper systems are in place to ensure that the privacy rights of users of the eNaira system are not violated.
This system has been built by Bitt, a global financial technology company. It provides digital currency and stablecoin solutions to central banks, financial institutions and ecosystem participants worldwide. As such, the maintenance of the eNaira system would very much depend on the technological strength of this company and the extent to which they are retained to provide a maintenance framework for the system.
Another issue is the electricity crisis and lack of widespread access to the internet across the country.
The eNaira design plans to use the existing Bank Verification Number and National Identity Number regime. Getting the documents needed for these is expensive and cumbersome.
With the African Continental Free Trade agreement now operational, the successful launch of the eNaira might be a step towards regional monetary integration in Africa and potentially a regional central bank digital currency.
Diverse Possibilities Of Payment Experience.
The eNaira wallet offers a great way of making purchases with retailers on-site, transferring or sending money while tracking rewards programs. You can link the e-wallet to your bank account or pay as you go with a prepay option. In addition, the embedded security token system makes your information unreadable to fraudsters because tokens are randomly generated every time you make a payment.
Its functionality delivers speedy, safe, and simple trading and transactional opportunities to customers and end-users:
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It is exchanged peer to peer.
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It is universal – anybody can hold it.
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It does not yield any interest.
How to get started
- Download eNaira app.
- Enter minimum identification details (i.e., NIN, BVN, or KYC/AML Information, depending on the customer tier you are).
- Enter other identification details (i.e., Name, Place and Date of Birth, Phone Number, Passport Photograph, Email and Password).
- Minimum ID is validated.
- You receive an email to activate your wallet.
- Log in to account
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