Digital Currency

What is eNaira all about in Nigeria

eNaira is more or less of the digital version of the Nigeria physical Naira. It is a Central Bank Digital Currency (CBDC) issued by Central Bank of Nigeria (CBN). The eNaira has thesame value with Naira, that is, will exchange 1:1 ratio.

ENaira
The eNaira is an electronic form of Naira, that is built on technology based on blockchain Technology which is centralized by the CBN, Unlike Cryptocurrencies that are decentralized.
It was launched in October 25, 2021 and 500 million of the eNaira were issued at launch. The new digital Currency is built on a distributed ledger technology (DLT), which is the basis of blockchain Technology. 
Cryptocurrency is also built on the DLT, this is one of the major similarity between them.
This is first of its kind in Africa. Nigeria is the first country in Africa to adopt this technology. It is not the first-ever, countries like China, United Kingdom, Bahamas etc has adopted it in the past. Learn more about 81 countries that have adopted CBDC.
eNaira is built aiming to improve financial inclusion, encourage diaspora remittances and facilitate a more efficient and cost effective cross-border payment
Furthermore, eNaira was developed by Bitt Inc., a Barbados fintech company responsible for the Digital Caribbean Eastern Dollar (DCash) issued by the Eastern Caribbean Central Bank. However, Bitt Inc. is allegedly registering as a company in Nigeria with CBN having a controlling stake in it as it did with NIBSS AND NEFT. This way it has a measure control over the company that developed its CBDC.

The eNaira is equal to the actual naira and it’s a liability of the Central Bank of Nigeria, making it safer that cryptocurrency.

What is eNaira?

eNaira is a Nigeria CBDC (Central Bank Digital Currency) developed using private blockchain based Hyperledger Fabrics, an open source DLT as a medium of exchange and a store of value in Naira. CBN is the only central legal entity that can issues the eNaira and it will circulate alongside the naira as legal tender in Nigeria.
Unlike Cryptocurrencies which is decentralized and the price is determined by supply and demand. CBDC doesn’t works that way, it is anchored by a value of a legal entity and centralized by an entity. For instance, CBN manage and control the eNaira. 
So, you might be wondering that the money in my bank is already digitalised, and I can access them on my bank mobile app without holding any cash, what’s the difference?

Why eNaira?

Nigeria has one of the most Advanced infrastructure payment in the world. In general, the Central Bank of Nigeria issues two (2) type of money and provide infrastructure to support a third, the physical cash and electronic central bank deposit, which is also known as reserves or settlement balances. 
The Central Bank Reserves is accessible by qualify financial institutions and the physical cash is used peer-to-peer.
So, when talking about why eNaira when I can access my money digitally? But before that, see how Central Bank access commercial banks money digitally.
  • Using Central Bank Reserves, commercial banks can settle interbank payments. That is, the money transaction you do on your bank mobile app to your friend bank, is carried out using the Central Bank Reserves. No physical cash is exchanged.
  • Allowing Convertibility between commercial banks and Central Bank Reserves through banknote provision.
  • Offering Contingent Liquidity via the lender of the last resort function.
However, while cash and reserves are a liability of the central bank, commercial bank deposits are not. This makes eNaira different from the money you have in your bank account, Kuda, OPay and those other types of financial Account.

Different Between eNaira and Central Bank Reserves?

Reserves are Central Bank money that can be accessed by legal financial institution. This is the type of money available in your bank account. It Is not physical Naira (naira note). Here the difference between eNaira and Reserves.
  1. Reserves are liability of the Central Bank while eNaira are Central Bank Digital Currency
  2. Reserves are accessable through legal entity while eNaira is distributed and built on Hyperledger Fabrics, an open source DLT based on blockchain Technology.
  3. Distributed ledgers allow members to securely verify, execute, and record their own transactions without relying on an intermediary. This gives much-needed transparency to transactions using the eNaira.
  4. Unlike Reserves that depends on intermediary institution (banks) to manage transactions.
  5. eNaira can be spend internationally.

Similarities between eNaira and Central Bank Reserves

  1. Both currencies are issued by the Central Bank of Nigeria (CBN).
  2. Both currencies are equal in value.
  3. Both are used for payment in one way or the other.

Benefits/Advantages of eNaira

E-Naira with many advantages and benefits. In Nigeria today, once you have a bank account, you can receive money from any part of the country and access it in a minute. What of does that doesn’t have an account?
Benefit of enaira
This is where eNaira comes in. With your phone number, you can get an electronic wallet that gives you permission to financial services. Although, getting an eNaira wallet with just a phone number is Limited to daily transactions of N20,000 and account hold up of N150,000.
eNaira, if manage properly can be used for cross-border remittance solution for individual and Businesses based in Nigeria.
Advantages of enaira
The CBN’s stamp of approval, assumption of liability, and the record immutability of the Distributed Ledger Technology can go a long way to help create confidence around the digital money as a secure means of sending money to Nigeria. The simple technology also means transaction costs will be very attractive.

More Advantages of eNaira are highlighted below
  • Reduce cost and improve efficiency of cross-border remittance
  • Enable direct welfare disbursements to citizens
  • Increase revenue and tax collection
  • Reduce cost of processing cash
  • Facilitate diaspora remittance
  • Improve availability and usability of central bank money
  • Support a resilient payment ecosystem
  • Encourage financial inclusion
  • Improve monetary and financial stability policies.
  • Improve FX position
  • Promote empowerment and reduce poverty

How does eNaira Works?

Here is how the eNaira works. The currency is built on two tier CBDC architecture, which ensure that CBN is not in direct competition with the banks and other financial institution.
The eNaira facilitates mass availability and adoption of the digital money by tapping into the existing payment infrastructure.



How the eNaira works

While the CBN (in the first tier) will be responsible for issuing the eNaira as well as managing the wallet and a central ledger of all transaction, the commercial banks and other licensed financial institution (in the second tier) will serve as nodes on the network for processing payment and handling and fulfilling other financial needs of the end users as well as ensuring record immutability.

So, while the CBN will be dealing with financial institutions, the financial institutions will be dealing with the end users. To facilitate this interface, the CBN offers API access to financial institutions and payment processors to enable them interact with the central ledger.

Though the funds still resides at the CBN, the central bank will not be dealing with customers directly. The banks and financial services providers will take up this role. This is why you are required to select a bank when setting up the eNaira wallet app. However, in the long run people without bank accounts will also be able to access eNaira via authorised agents.

eNaira is based on a Blockchain Technology Distributed Ledger powered by enterprise grade Hyperledger Fabric, an open source DLT. This setup ensures a secure, scalable, and customizable platform. Each unit of the new digital currency will have a unique identity and cannot be duplicated or faked.

How to get eNaira?

eNaira account is classified into two (2) part. The merchant account and the consumer account. To get eNaira account, follow the instructions below.
  • Download eNaira Speed Merchant Wallet app for merchants or eNaira Speed wallet app consumers at Google Play for Android or Apple app store for IPhone.
  • Install and launch the app
  • Create an account and choose which bank will be responsible for processing your transactions.
  • Enter your personal details (such as full name, date of birth, state of origin, BVN etc). Note – your details must be the same with the ones on your BVN.
  • Fund your wallet. You can find your speed wallet through you bank app or internet banking. You can also received fund from another eNaira wallet or authorized agent.

eNaira Wallet Tier and Transactions Limit

As I said earlier, there are two (2) wallet associate to eNaira, the individual wallet for personal account and the merchant wallet for registered Businesses and corporate account holder.
The individual wallet is classified into four (4) types. The first two (2) tier is classified as unbanned and the remaining two required a bank account as well as BVN.

eNaira Individual Wallet Tier Limits

0 level tier

  • Category – non bank account holder
  • Requirement – telephone number (awaiting NIN verification)
  • Daily transactions limit – 20,000 Naira
  • Daily Cumulative Balance – 120,000 Naira

1 level tier

  • Category – non bank account holder
  • Requirement – telephone number (NIN verified)
  • Daily Transactions Limit – 50,000 Naira
  • Daily Cumulative Balance – 300,000 Naira

2 level tier

  • Category – bank account holder
  • Requirement – BVN
  • Daily Transactions Limit – 200,000 Naira
  • Daily Cumulative Balance – 500,000 Naira

3 level tier

  • Category – bank account holder
  • Requirement – BVN
  • Daily Transactions Limit – 500,000 Naira
  • Daily Cumulative Balance – 5,000,000 Naira
These information is derived from the Central Bank of Nigeria.

eNaira Merchants Wallet Tier and Limits.

The Merchant Wallet required a company information to open the account. Details like, TIN (Tax Identification Number), BVN and Bank Confirmation.
No daily limit and no cumulative limit in eNaira Merchants account.

eNaira Transactions Charges

I can say this is one of the advantages of eNaira. It’s transactions cost is simple and affordable, for every transfer 5,000 Naira and below, will be charged 10 Naira fees only.
For every transfer above 5001 Naira to 50,000 Naira will be charged 25 Naira fees. Any transaction above 50,000 Naira will bear the cost of 50 Naira fees.
However, CBN is waiving transactions cost for 90 day, which has started in October 25.

Characteristics of eNaira

  • eNaira does not yield interest
  • eNaira operate on blockchain Technology like cryptocurrency but centralized
  • It has the same value as Naira
  • It is centralized and manage by the Central Bank of Nigeria (CBN).
  • It can be used for instant diaspora remittance
  • eNaira also support the unbanked to send and receive money.

Conclusion

The eNaira is the first of it kind in Africa and it was adopted in Nigeria. Providing many Advantages and benefits to the country. Learn more about the new digital currency designed paper here.
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