The Central Bank of Nigeria announced its decision to launch an indigenous digital currency after it banned the use of cryptocurrency in the country. According to the apex bank’s governor who seems rather averse to the idea of digital money, cryptocurrency is associated with “…activities of traders in an electronic dark world where transactions are not visible and not transparent”. He also added that “We have carried out our investigation and we found out that a substantial percentage of our people are getting involved in cryptocurrency which is not the best. Don’t get me wrong, some may be legitimate but most are illegitimate”.
The country’s indigenous digital currency is called the ‘e-naira’ and is expected to be launched in October of this year. The decision to launch e-naira was first announced in an online news briefing at the end of a Bankers Committee meeting that took place months ago. The disclosure was made by Rakiya Mohammed, an Information Technology Specialist with the Central Bank of Nigeria, who said that the Central Bank has been exploring the technology used for powering digital currency for the past two years.
Set to launch in October, the Central Bank of Nigeria has issued a detailed presentation to Nigerian banks on how they are expected to operate with the e-naira. The question on your mind might be why there are ‘dos’ and ‘don’ts’ surrounding this digital currency. The answer is that, although the e-naira will be similar to Bitcoin, Ethereum, etc., and built on the same technology, it will be regulated by the government, hence the rules surrounding it.
The Central Bank is issuing a “speed wallet” to users to be able to meet up with its target launch date of October 1st to commemorate the country’s 61st anniversary. Banks and other financial institutions will subsequently be able to issue their wallet to hold the e-naira. The Central Bank’s speedy wallet will have three tiers with different functions and conditions for use.
The first tier of the speedy wallet can be used by anyone who does not own bank accounts. It, however, comes with conditions. Users who intend to hold the e-naira must have a National Identity Number (NIN). At the first tier, users will only be able to make transfers at a daily transfer limit of N50,000 and a cumulative balance of N300,000.
At the second tier, users will be required to link a Nigerian bank account that has already been connected to their Bank Verification Number (BVN). If these conditions are not met, one cannot own a tier 2 wallet. The daily transfer limit will be set at ₦200,000 while the maximum balance will be ₦500,000.
The tier 3 wallet also requires that a Nigerian BVN- linked bank account be provided. It has a daily transfer limit of ₦1,000,000 and a total balance of ₦5,000,000. An additional merchant-level wallet will also have transaction limits of ₦1,000,000, however, users can have as much money on the wallet as possible.
Compared to other cryptocurrencies and how they are held, the CBN’s digital currency seems to have lots of limitations but this decision to set limits on the wallet type must be borne out of the CBN Governor’s concern that digital currency is used to fuel money laundering and terrorism.
Although it has the aforementioned limitations, the e-naira and its complementary speedy wallet have some advantages too. Users won’t be charged for peer-to-peer transactions, merchant services, user-to-merchant transactions, as the e-Naira doesn’t require the user to pay interests. This is one offer that both the traditional banking system and other digital currency providers do not make available.
The CBN has announced that it will allow Nigerian banks to invite their customers to register on the digital platform after the launch of the e-naira on the 1st of October. Customers must, however, undergo compulsory verification steps to validate their authenticity and whether their information is accurate. A CBN spokesperson also added that “Nigerian banks will be mandated to market and promote the e-Naira to their customers. This is in line with the financial inclusion objective of the Central Bank of Nigeria”.