Nigerian e-naira; All you need to know

The Central Bank of Nigeria (CBN) is set to launch the e-naira on October 1st. Let us take a closer look at the eNaira, what it means for you, and how you can position to take advantage of its launch.

 

What is the e-Naira?

The e-Naira will be a digit representative of the paper Naira currency issued by the Central Bank of Nigeria. It 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. The e-Naira will not earn any interest to holders. The e-Naira is built on a blockchain open ledger technology. Creating the eNaira on the blockchain means you cannot have a duplicate or fake eNaira.

 

Is the e-Naira a Stablecoin?

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

 

How safe is the e-Naira?

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.

Also Read: top 5 ways your business can use technology to gain competitive advantage

How will I get the e-Naira?

The CBN has planned a rollout in a tiered manner; first, it will issue the e-Naira, to financial institutions like banks. Your bank will then retail the e-Naira to you. 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. 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. 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?

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

Also Read:  side hustle to generate passive income.

What are the risks?

Data security. 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. The process of minting and burning eNaira tokens by the CBN has to be top-notch.

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.

 

Total
6
Shares
Leave a Reply

Your email address will not be published. Required fields are marked *

Previous Post

What is Machine Learning?

Next Post

How to become a better software developer

Related Posts