Central Bank of Nigeria, the country's monetary authority in charge of financial activities through Rakiyat Mohammed, a Central Bank Director in charge of the Information Technology Department, had few weeks ago announced it was launching ‘a digital currency’ tagged Project GIANT which will use the Hyperledger Fabric Blockchain.
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| Central Bank of Nigeria (CBN) Building | Image Source: punchng.com |
Central Bank Digital Currencies (CBDCs) - eNaira was announced after the widely reported ban on cryptocurrencies but the CBN debunked the news saying “we did not place restrictions from use of cryptocurrencies and we are not discouraging people from trading in them.”
"What we have just done was to prohibit transactions on cryptocurrencies in the banking sector."
The apex bank said it has reiterated an already imposed 2017 ban on institutions facilitating cryptocurrency transactions.
The formal engagement of Butt Inc., a Fintech company as the technical partner for its digital currency - eNaira was announced on Monday 30th August, 2021. eNaira is expected to be unveiled before the end of 2021.
Governor Godwin Emefiele said the benefits of Central Bank Digital Currency (CBDC) are increased cross-border trade, accelerated financial inclusion, cheaper and faster remittance inflows.
“Given the significant explosion in the use of digital payments and the rise in the digital economy, the CBN’s decision follows an unmistakable global trend in which over 85 percent of central banks are now considering adopting digital currencies in their countries.”
Other benefits are easier social interventions, improvements in monetary policy effectiveness, payment systems efficiency, and tax collection, etc.
Central Bank Digital Currency (CBDC) vs CryptoCurrencies
A country's Digital Currency or Central Bank Digital Currencies (CBDCs) represents its official currency in digital form. They are different from ‘blockchain backed’ cryptocurrencies such as Ethereum, Bitcoin, or Dogecoin.
Blockchain is not regulated by government authorities but Digital currencies like Nigeria CBDCs, Bahamas ‘sand dollar’, and China ‘digital yuan’, are regulated by their different countries.
Bahamas and China are the only two other countries that have successfully launched fully functional digital currencies. The Bahamas launched the sand dollar in October 2020 (with Mastercard and Island Pay digital currency-linked digital card in February 2021), while China launched its own digital yuan (e-RMB or e-CNY) earlier this year 2021.
According to CNBC, nearly 80 other countries around the world are researching or testing a digital currency of their own, based on Central Bank Digital Currency (CBDC) Tracker & interactive database, CBDC Tracker.
Everything You Need To Know About Nigeria e-Naira
The Central Bank of Nigeria released guidelines on how its Central Bank Digital Currencies (CBDCs) - eNaira with wallet codename ‘speed wallet’ will operate. The guidelines state as follows:
1. The Nigeria digital currency (e-Naira) will be regulated, designed, and issued;
2. The Central Bank Digital Currency (CBDC) pilot scheme will launch October 1st;
3. The e-Naira will be accessible to bank account holders and non-account holders;
4. The CBN digital currency - eNaira wallet is code named - ‘Speed Wallet’;
5. Speed Wallet will have three tiers. The tier 1 wallet is open to anyone without a bank account. It also comes with a transfer limit of ₦50,000 and a cumulative balance of ₦300,000 fixed daily;
6. The minimum requirement to open this tier 1 wallet is National Identity card (NIN)
7. For tier 2 wallets users, an existing bank account with a linked bank verification number (BVN) is the minimum requirement for this level. Users are restricted to sending and receiving ₦200,000 daily and having a balance of ₦500,000.
8. Tier 3 wallet holders can transact up to ₦1,000,000 daily with the cumulative balance set at ₦5,000,000. Also, BVN is needed to get this wallet category.
9. Transaction limits on merchant-level wallets are also set at ₦1,000,000 per day, though there are no limits to how much users can have in their accounts.
10. The digital currency infrastructure does not charge for user-to-merchant transactions and P2P wallet transactions.
11. Finally, after the launch, Nigerian banks can invite all their customers to register for the e-Naira, with necessary validation and verification processes.
While The Federal Government of Nigeria is optimistic that Central Bank Digital Currencies (CBDCs) - eNaira will help shape the economy, whether it will - time will tell.
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