The Central Bank of Nigeria (CBN) is set to launch the e-Naira digital currency  on October the 1st after CBN barred banks and financial institutions from dealing in or facilitating transactions in cryptocurrencies in February.

Central Bank Governor Godwin Emefiele has said the eNaira currency would operate as a wallet against which customers can hold existing funds in their bank account.

In a statement, Emefiele said the currency would accelerate financial inclusion and enable cheaper and faster.

Let us take a closer look at the eNaira digital currency, what it means for you, and how you can position to take advantage of its launch.

All You Need To Know About e-Naira Digital Currency

What is e-Naira Digital Currency?

1. The e-Naira will be a digit representative of the paper Naira currency issued by the Central Bank of Nigeria.
2. The eNaira digital currency will be a “complementary” legal tender in Nigeria, having the same exchange value as the Naira, and maintain a “parity of value” with the Naira.
3. The e-Naira will not earn any interest to holders.
4. The e-Naira is built on a blockchain open ledger technology.
5. Creating the eNaira on the blockchain means you cannot have a duplicate or fake eNaira.

 Is the e-Naira Digital Currency a Stablecoin?

1. A stable coin is a cryptocurrency backed by reserves.
2. The keyword is reserves, but what kind of reserves?
3. Stable coins are backed by holding an equal equivalent of FIAT money like the US dollar.
4. FIAT means government-issued but usually not backed by any commodity, e.g., gold.
5. Thus a stable coin like USDT is tied to a currency, the US dollar, and maintains a stable exchange value. Note, stable, not immovable.
6. The eNaira technically is linked to the FIAT Naira, but is the Naira stable? Well, not exactly.
7. To be a stable coin, the eNaira has to be tied to a currency like the US Dollar or Euro or even the Yuan.

READ THIS: eNaira-Nigeria Set to Launch its Digital Currency

How Safe is the e-Naira Digital Currency?

Think of the e-Naira in this way; you want to send N100 to an uncle in a remote village without a bank branch. A common practice is to buy mobile phone recharge cards of that value, load them to your phone, and text your uncle. Your uncle can then go to any phone card retailer and discount his N100 mobile phone credit for N95.

The mobile retailer can redeem the call credits and pay cash because he trusts the person doing the exchange; however, he cannot tell if the mobile numbers are real.

The eNaira is designed to solve this verification risk by assuring all holders that each eNaira is a valid token. This authenticity is achieved by building the eNaira on the blockchain.

Thus instead of buying phone credits, I will debit my bank account for N100, convert to eNaira, and transfer it to my uncle. My uncle can spend the funds directly from his phone or transfer and get cash.  Every retailer is more likely to accept the eNaira because it can’t be easily faked.

WATCH VIDEO: How Does e-Naira Work In A Digital Economy

 How will I get the e-Naira?

1. The CBN has planned a rollout in a tiered manner; first, it will issue the e-Naira, to financial institutions like banks.
2. Your bank will then retail the e-Naira to you.
3. If your transaction value is less than N50,000 a day, you don’t need a bank account to get the eNaira; you can use a NIN verified phone number to buy eNaira.
4. If you want to withdraw more than N50,000 but up to the daily limit of N1 million, then you will need a BVN in addition to a NIN verified phone number.
5. The CBN has very strict ‘Know Your Customers” protocols for this process, the aim being to assure all retailers of the safety and utility of the eNaira.

Why should I use the e-Naira Digital Currency?

1. The eNaira has a low-cost advantage when compared to FIAT.
2. The daily transfers between accounts are at no cost to the holder of the account.
3. Lower transaction cost is a massive incentive as traders will pay no fees for withdrawals and deposits to and from their bank account.
4. No transaction fees reduce the cost of commerce while improving safety.

READ THIS: 13 Best Business Ideas You Need To Start & Make Money

How will Dollar remittance to e-Naira currency work?

1. The e-Naira will be integrated into the CBN’s forex process, and this is to make it easier to receive remittances to Nigeria.
2. These transfers could be from the CBN crediting e-Naira directly to the International Money Transfer Organisation (IMTO).
3. A Nigerian abroad sending $100 to his uncle can debit his US bank account and credit $100 to an IMTO, who will buy eNaira from their corresponding Nigerian bank.
4. The $100 is converted to e-Naira instantly at a far lower transfer fee which is a real benefit and a significant advantage the e-Naira will enjoy.

What About Inflation?

The street definition of inflation is too much cash chasing too few goods; however, not all inflation is this simple.

Coins in Nigeria are scarce; thus, most merchants round up their prices to match with available currency, usually notes. Recently a popular online Forex News site, AbokiFx was investigated by CBN because they claim the company is publishing a manipulative and  false exchange rate.

This rounding up induces an artificial rise in prices because any cost-push does not cause the price hike but other factors, for example, selling eggs for N100 instead of N88.

With the e-Naira digital currency, it becomes possible to transfer the exact cash price in the marketplace, especially in rural areas.

This reduces the possibility of “round-up inflation.”

READ THIS: Job Vacancies: Nigeria LNG Recruitment 2021

The e-Naira currency can be the ECOWAS Currency

The e-Naira can be used by any two parties who can credit a Nigerian banking institution with corresponding currency.

This means a trader banking with UBA in Burkina Faso can settle his import bills from the Gambia using e-Naira.

This will be the next level of the rollout. The financial institutions and FINTECH start to build out an ecosystem with eNaira as the base product.

How Does e-Naira Currency Work In A Digital Economy

1. The e-Naira currency will also bring in the vast majority of the unbanked Nigerians who have no bank account but have a phone into the formal financial digital economy.
2. With the e-Naira, salary payments and payments for goods and services can be concluded.
3. A skilled plumber who is doing business can accept payments on his phone, store them in his wallet, and make transactions with any vendor.

What are the Risks?

Data Security

1. The e-Naira is online, the BVN and NIN information is also online, the risk of malicious actors attempting to hack or gain access to the data is very low.
2. The process of minting and burning eNaira tokens by the CBN has to be top-notch.
3. Overall, it’s a plus to the Nigerian economy, and it’s a positive progression towards a cashless society, with lower costs, and higher productivity

Conclusion 

Central Bank need to enlighten Nigerians on how to really use the new Digital Currency so as to boost its digital economy, when they do this; then the question of how does e-Naira work in a digital economy will be a thing of the past because there will be a lot to show for it.

Please Share This Post

READ THIS:

VIDEO: How Does e-Naira Work In A Digital Economy

How To Make Money As A Copywriter In Nigeria

How to Get Freelance Jobs In Nigeria:Ultimate Guide

eNaira-Nigeria Set to Launch its Digital Currency

Tezos Review – Everything You Need To Know