In reaction to the expansion of online payments and interest in crypto-currency which are beyond the jurisdiction of governments and global regulators; central banks around the world are researching ways to create digital versions of their currencies.
These are known as Central Bank Digital Currency. CBDCs are virtual currencies developed and regulated by central banks, whereas crypto-currencies are uncontrollable by governments.
Last year, China was the first big country to introduce a pilot version of a digital currency. According to the Atlantic Council, at least five countries have established their virtual currencies since then.
On October 1st, the Central Bank of Nigeria (CBN) will introduce the eNaira. Many Nigerians are currently looking forward to the launch of this cryptocurrency. Are you too? Well, I’ll be covering all you need to know about the e-Naira in this article.
The e-Naira will be a digit representation of the Nigerian Central Bank’s paper Naira currency. In Nigeria, the eNaira will be a “complementary” legal tender with the same exchange value as the Naira and will retain “parity of value” with the Naira. Holders of the e-Naira will not get any interest. The e-Naira is based on the open-source blockchain technology. You can’t have a duplicate or fake eNaira because it’s created on the blockchain.
A stable coin is a cryptocurrency that has reserves backing it up. This implies holding an equal amount of FIAT money. FIAT refers to currency that is issued by the government but is not backed by any commodity, such as gold. As a result, a stable coin like USDT is linked to a currency, the US dollar, and its exchange value remains stable.
It’s important to note that the word “stable” does not mean “immovable.” Although the eNaira is technically linked to the FIAT Naira, it’s not quite stable. The eNaira must be linked to a currency such as the US Dollar, Euro, or even the Yuan to qualify as a stablecoin.
Benefits of eNaira
eNaira is real money that you can earn and keep in an e-wallet. As a result, you will be able to transact with it in the same way that you would with naira notes, without the need for intermediaries. This is in contrast to digital banking, which involves customers conducting transactions with money held in a bank.
The introduction of eNaira and the removal of intermediaries is expected to:
- Reduce transaction costs and times.
- Make cross-border transactions easier
- Allow unbanked Nigerians to deal in eNaira without the use of a private bank account.
- Financial Inclusion is Promoted by the eNaira
The eNaira will allow Nigerians who are currently unbanked to participate in the financial system. Salary payments and payments for products and services can both be completed via the eNaira. When compared to FIAT, the eNaira has a lower cost.
The account holder is not charged for daily transfers between accounts. The fact that traders will not be charged fees for withdrawals and deposits to and from their bank account is a huge incentive. Transaction fees are eliminated, lowering the cost of doing business while increasing security.
The e-Naira can also be beneficial to Nigerians at international level. The e-Naira will be incorporated into the CBN’s FX process, making receiving remittances to Nigeria easier. These transfers could be made directly from the CBN to the International Money Transfer Organizations using e-Naira.
For example, a Nigerian sending $100 to his uncle in the United States can debit his US bank account and credit $100 to an IMTO, which will purchase eNaira from their Nigerian bank. The $100 is instantly converted to e-Naira at a significantly lower transfer fee, which is a significant benefit for the e-Naira.
By informing all holders that each eNaira is a legitimate token, the eNaira is aimed to eliminate verification concerns. The eNaira is built on the blockchain to ensure its legitimacy.
The Central Bank of Nigeria (CBN) has assured Nigerians that the proposed launch of the country’s pilot digital currency, eNaira, will be subject to extensive security checks to ensure its safety.
The eNaira system, which is classified as a National Critical Infrastructure (NCI), will ensure that all data and personally identifiable information (PII) is kept off the ledger and not stored on it.
As digital assets acquire acceptance around the world, this will assist to repair the low-trust environment linked with rising cyber criminal activity.
How To Get e-Naira
The CBN intends to roll out the e-Naira in stages; first, it would issue the currency to banks and other financial institutions. The e-Naira will subsequently be sold to you by your bank. You don’t need a bank account to get eNaira if your transaction value is less than N50,000 per day; you can buy it using an NIN verified phone number. You’ll need a BVN in addition to an NIN confirmed phone number if you wish to withdraw more than N50,000 but less than N1 million each day. The CBN has very strong “Know Your Customers’ ‘ rules in place for this process, with the goal of assuring all retailers of the eNaira’s safety and utility.
The e-Naira will have both cryptocurrency (blockchain) features and mobile money (phone number) features. It’s a good development for Nigeria’s finance system and will no doubt help make money circulation faster and more efficient.
To make the eNaira project a success, a large number of Nigerians will need to keep their e-wallets active. Nonetheless, eNaira will be hampered by some of the country’s current difficulties, such as illiteracy, a lack of power, a lack of internet access, and the currency’s instability.