Nigeria Launched Africa’s First Central Bank Digital Currency
Everything You Need to Know About the eNaira
Nigeria, the largest economy in Africa, today followed the example of China and others by rolling out a central bank digital currency (CBDC) as it looks to tap into the crypto renaissance taking place in the country.
“Nigeria has become the first country in Africa, and one of the first in the world to introduce a digital currency to her citizens,” President Muhammadu Buhari stated during a speech, Bloomberg reported.
“The adoption of the central bank digital currency and its underlying technology, called blockchain, can increase Nigeria’s gross domestic product by $29 billion over the next 10 years,” he added.
While the CBDC, called the eNaira, was originally scheduled to go live Oct. 1, this launch was postponed because of Independence Day celebrations, according to the Central Bank of Nigeria (CBN).
The CBN Facebook page spoke to this matter earlier in 2021.
“Ahead of the anticipated launch of Nigeria’s Central Bank Digital Currency (CBDC), known as eNaira, the Spokesman of the Central bank of Nigeria (CBN), Mr. Osita Nwanisobi, says the planned unveiling on October 1, 2021, has now been deferred due to other key activities lined up to commemorate the country’s 61st Independence Anniversary.”
“While assuring that there was no cause for alarm, he said the CBN and other partners were working round the clock to ensure a seamless process that will be for the overall benefit of the customer, particularly those in the rural areas and the unbanked population,” the page added.
At the time, the aforementioned page did not specify when the eNaira would launch. However, an official web page for the CBDC went live on Sept. 28, four days before the prior launch date of Oct. 1, and it led visitors to download the mobile app, which can be accessed through the Google Play Store and Apple’s App Store.
Bitt Inc., a Barbados-based fintech firm, is in charge of e-Naira development. In this update, we will try to dive deep into some questions readers may have about the electronic version of Nigeria’s fiat currency.
Is the eNaira a cryptocurrency?
It is inaccurate to describe CBDCs as being the same as cryptocurrencies. CBDCs are the electronic form of fiat money, which means they are backed by a central authority.
Cryptocurrencies, on the other hand, are decentralized, meaning they are not controlled by a central authority.
A good way of illustrating the difference is the concept of a digital dollar. Such a currency would be backed and controlled by the Federal Reserve, just like the U.S. dollar we have now. If the Fed ever created this digital fiat currency, that should not change the greenback’s status as the global reserve currency.
The vast majority of cryptocurrencies, on the other hand, are volatile and just gaining traction.
The eNaira is not a cryptocurrency, at least by the aforementioned definition, but is instead a digital version of the naira.
How Safe is the eNaira?
The eNaira would be held in the account of either an individual or a business (or corporate entity), according to an FAQ section on the eNaira website. Individual and corporate owners of the eNaira will need to be validated to harness the CBDC.
The central bank has clarified that it can harness existing data including national identification numbers, bank verification numbers, and taxpayer identification numbers to identify both corporate and individual users of the eNaira, the Design Paper states.
“Specifically, identity frameworks such as the NIN will enable access for the financially excluded as they can be uniquely identified thereby enabling the provision of financial services,” the document adds.
In order to secure the wallets of users, the eNaira system will leverage both cryptographic encryption and a two-factor authentication system.
Will FinTech Firms Integrate eNaira into their payment services?
Open banking forms part of the emerging areas within the FinTech ecosystem. It grants third-party providers open access through Application Programming Interface(API).
It is worth noting that commercial banks have started integrating the eNaira feature into their applications. A perfect example is the Guaranty Trust World app, which integrated a feature for this CBDC in its latest update.
Is the eNaira a Solution to Nigeria’s Financial Exclusion?
According to the World Bank, the ability of an individual to possess a transaction account is the first step toward broader financial inclusion, because it will give them the ability to leverage broader financial services.
Unfortunately, Nigeria has struggled with financial inclusion. Despite several attempts made by the CBN to provide the adult population with access to the financial services sector, most people in the country remain unbanked.
Loss of trust in financial service providers, high poverty rate, proximity to service points, and cost of account maintenance are all major factors contributing to financial exclusion in the country, according to this report.
The CBN’s financial inclusion target could potentially be realized through the launch of the eNaira. If implemented effectively, this CBDC could be a major game-changer in terms of bolstering financial inclusion.
“Beginning October 1st, a Nigerian can download the eNaira app from either the Google Play Store or the App Store and fund their eNaira wallet using their bank accounts or cash at a registered agent location,” said Godwin Emefiel, governor of the CBN.
Final Remarks
More people are starting to realize how cryptocurrency can contribute to everyday business activities, and those in Nigeria are no exception.
Despite the crackdown on such activities in the country, the appetite these individuals have for crypto has become even stronger, with more people relying on digital currencies for international remittances, which is, in turn, hurting the naira.
We firmly believe that the CBN aims to leverage the eNaira to help reduce the dependency on cryptocurrencies, as well as increase the efficacy of monetary policy, boost remittance through the right channels and enhance the government’s ability to use targeted policies to address social problems.
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This content is for educational purposes only. It does not constitute trading advice. Past performance does not indicate future results. Do not invest more than you can afford to lose. The author of this article may hold assets mentioned in the piece.
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