Nigeria is getting ready for the pilot launch of its new digital currency, the eNaira, on October 1.
The new currency is being issued and regulated by the Central Bank of Nigeria (CBN), which launched a new website on 27 September that will act as the new currency’s official platform.
The move comes as a surprise to many as the CBN, like other central banks, has been suspicious of cryptocurrencies, such as Bitcoin, since their inception. As recently as February, the Nigerian government issued a directive that prohibited banks from taking part in financial transactions involving cryptocurrencies, where many Nigerians have placed their savings as a hedge against naira depreciation.
Although it later clarified that individuals were not prohibited from buying and selling, traders were forced to carry out their business on peer-to-peer platforms, and effective black markets.
However, led by developments in China, central banks are increasingly coming round to the idea of creating their own digital currencies, seeing them as useful tools for promoting cross-border transactions, providing stability to payment systems and extending financial inclusion.
Nigeria is one of around 80 countries around the world that has been exploring the possibility but will be the first to launch one in Africa. South Africa is moving towards a trial, while Ghana, Morocco, Tunisia, Kenya, and Madagascar are all reported to be in the research stages.
The CBN is working with technical partner Barbados-based Bitt Inc, whose electronic ledger, known as a Digital Currency Management System (DCMS), will be used to manage the currency. Before partnering with Africa’s largest economy, Bitt Inc worked with the Eastern Caribbean Currency Union to launch “DCash” earlier this year – the first digital cash issued by a currency union central bank.
We spoke to Bitt Inc and others to find out all you need to know about the new currency, how it works and why it is being introduced.
What is the eNaira?
The eNaira will be an electronic version of the local paper naira currency, equal in value and issued by the Central Bank of Nigeria.
How does the eNaira differ from a cryptocurrency like Bitcoin?
The eNaira will be a central bank digital currency, or CBDC, issued by the government, and it will have the same value as the paper currency – it will be pegged to the naira. Its value will therefore rise or fall in relation to the dollar but is unlikely to be as volatile as a cryptocurrency. Some cryptocurrencies are pegged to currencies, but none are backed by governments.
CBDCs also differ from cryptocurrencies in being regulated and therefore subject to banking laws.
Why is the CBN introducing the eNaira?
The onset of the pandemic has led to the closure of bank branches across the country, which reopened mainly in urban centres. This further excluded Nigerians without bank accounts in remote areas from the financial system.
The digital currency aims to integrate millions of unbanked Nigerians into the banking sector. Some 55% of adult Nigerians were unbanked in 2020 – around 58m people. Of these, 35m own mobile phones and could be reached with mobile money.
The eNaira is aimed at boosting transparency by allowing the regulator to better monitor currency transactions and curb black-market trading in the paper naira. The new currency is built on blockchain’s open ledger technology, which reduces the risk of fraud by ensuring each eNaira note is unique and can’t be duplicated or counterfeited.
It is also aimed at boosting inbound remittances by providing a cheaper, more secure and faster way for the diaspora to send money. Remittances to Nigeria amounted to over $17.2bn in 2020, according to the World Bank.
Remittances are an integral part of the Nigerian economy, especially for the unbanked, Bitt Inc told African Business.
“However the costs and logistics associated with these transactions can also be prohibitive for people living in remote parts of the country. The eNaira will enable direct remittance payments between Nigerians within and outside of the country,” said their representatives.
The eNaira is also intended to reduce so-called “leakages” from state budgets due to in-built traceability that uses blockchain technology. It is furthermore hoped that the new currency will offer an alternative to the cryptocurrency black market.
How do you get the eNaira?
The pilot launch will take place in Port Harcourt, Abuja, Kano and Lagos, but the digital currency is intended to be universal, meaning that it will eventually be possible to use it around the world to send and receive money or pay for goods and services.
To use eNaira, first, you have to create an eNaira wallet, which is digital storage managed by blockchain technology. To do this on a smartphone you download the entire app from either the Google Play Store or Apple Store and complete the registration process. Feature phone users can use USSD codes and follow the registration prompts.
Several tiers of eNaira wallet are available, requiring different levels of identification, depending on whether a person has a bank account and the level of transactions they wish to make. In September 2021, these were
| Tier | Category | Requirement | Daily Limit (eNaira) | Total limit |
| 0 | No existing bank account | Name, birth date, phone number and National Identification Number (NIN) | 20,000 ($48) | 120,000 ($292) |
| 1 | No existing bank account | Name, birth date, phone number and National Identification Number (NIN) | 50,000 ($121) | 300,000 ($729) |
| 2 | Has existing bank account | BVN (Bank Verification Number) + valid identification | 200,000 ($486) | 500,000 ($1,215) |
| 3 | Has existing bank account | Tier 2 requirements + public utility receipt | 500,000 ($1,215) | 5,000,000 ($12,000) |
How does it work and what are its advantages?
The eNaira will be legal tender and users will be able to make peer to peer payments without having to use an intermediary, thereby saving on the charges involved in transfers via digital banking. Nigerians will be able to make payments for all manner of goods and services this way.
Unbanked Nigerians will be able to make transactions of up to N50,000 a day without the need for a bank account, while those with bank accounts will be able to send or receive money using a bank account or credit card linked to their eNaira wallet. It will be possible for customers to monitor their wallets, balances, and transaction history.
Customers will be able to use their eNaira wallets to purchase goods in-store by scanning QR codes.
Is this an epochal moment in African banking?
The move could reshape the country’s financial landscape and push legacy banks to expand and adapt the services they offer, says Bitt Inc.
“Bitt believes that central bank digital currencies (CBDCs) represent a first step toward realising a quantum leap in infrastructure transformation that enables global financial networks to interact in a faster, more modern, and secure way,” the firm says.
AfricanBusiness
