With the widely acceptance of cryptocurrency in today’s economy all over the world, Nigeria government has come up with an innovative eNaira digital currency.
Recently, the Central Bank of Nigeria (CBN) announced plans to launch their own digital currency called the eNaira.
What is eNaira digital currency?
eNaira is the name given to the CBN’s first proposed digital currency.
To understand eNaira and what Nigeria can get from it, you must first know that eNaira digital currency is a blockchain technology product.
The biggest problem blockchain has to solve is transparency. “Think of it like opening an account with one of the Nigerian banks, say Zenith. When you make a transaction, such as a withdrawal, only the bank with which you made the transaction knows about the transaction.
If you go to Fidelity or FCMB they won’t be able to retrieve the transaction for you. This is an example of a centralized system in which all data is recorded in one place (in this case, Zenith bank).
You can trust your bank only when what it provides, such as transaction history, is consistent with your personal bank record.
However, in a decentralized system, transaction records are automatically stored in every bank, so the information in your Zenith account will be exactly the same when you check it with Zenith, Fidelity or FCMB.
This means that neither you nor your bank can ever deny the transaction was made. Basically, this is what blockchain technology is all about.
Now imagine the government is trying to subsidize farming. Thanks to the decentralized blockchain system, every farmer who needs a subsidy will be able to get it, the government won’t have to worry about ghost farmers, and the records will be there for verification.
The goals have been achieved and the integrity of the government is maintained.
How will eNaira work?
The eNaira digital currency will work as a digital version of the physical Naira.
Unlike Bitcoin, where anyone can mine and record transactions on the Hyperledger blockchain, eNaira miners will be tightly controlled and regulated by the CBN.
While CBN grants licenses to banks and fintech companies to mine digital currencies and build portfolios for their customers, the Nigerian Interbank Settlement System (NIBSS) is likely to be used to resolve disputes.
CBN-licensed financial institutions are responsible for verifying identity, processing of eNaira payments, and creating portfolios in which customers can store their eNaira digital currency.
Can the government monitor transactions with the eNaira?
The Nigeria government will monitor all eNaira transactions on the Hyperledger Blockchain. Unlike bitcoins and other cryptocurrencies, governments can track who buys and sells eNaira or make use of it in any way, whether for legal or illegal activities.
eNaira wallet, how will it look like
The eNaira wallet is almost going to be like a bank account. However, this will be a separate account, not linked to an existing bank account.
Transactions are possible between the two parties using the eNaira wallet irrespective of where they are making the transaction from. ENaira wallet is used to store, send and receive eNaira.
Why is Nigeria introducing eNaira digital currency?
The idea of a country venturing into a digital currency is not new. With the advent and widespread adoption of cryptocurrencies, banking institutions cannot ignore the revolution.
Many of them are starting to take advantage of the opportunities that blockchain technology offers. The CBN banned cryptocurrency trading in Nigeria in February this year, whereas Nigeria has the second highest cryptocurrency usage in the world. This made CBN fearful about what the future without digital currency hold.
The Apex Bank is concerned that Nigerians may ditch their fiat currency. According to CBN, eNaira’s goals are to support financial consolidation, improve payment efficiency, increase tax revenues and fees, and social engagement.
Benefits of eNaira to Nigeria and its citizens
Countries that accept digital currencies have many advantages, some of which are listed below
- First, they no longer need to print as many bank notes. And as a result of paper will be saved.
- This will improve the government’s ability to track funds. The government can see who transferred the money, where it went and how it was spent.
- This reduces the frictional losses and costs associated with traditional remittances, and keeps monetary policy free.
- This ensures smoother and faster performance. Citizens will benefit greatly because it supports financial inclusion.
- This means that individuals and businesses can easily access valuable and affordable financial products and services.
- Digital currency improve the efficiency of payment and tax collection systems, and encouraging and accelerating cross-border transactions.
Is eNaira like Bitcoin and other cryptocurrencies?
eNaira is not a cryptocurrency. It is a Nigerian government-issued digital currency, unlike Bitcoin, which is a cryptocurrency.
Simply put, eNaira is a digitally created currency to facilitate digital transactions. We can use Naira to conduct digital transactions, but eNaira does not have to be backed by physical money.
This basically means converting the Naira paper money to the currency for Internet use.
This difference between cryptocurrency and eNaira has a huge impact on the stability of the currency.
For example, eNaira retains the same value as naira. Thus, its value will not rise and fall like that of cryptocurrencies, which also means that you cannot invest to increase your wealth.
ENaira makes it easy to process transactions digitally without depositing cash.
Cost of having and using eNaira
Using eNaira digital currency will not attract any fees or or exchange cost. Its advantage is that it significantly reduces transaction fees (since it uses a peer-to-peer model). In fact, in some cases it transaction costs are totally eliminated.
Only the eNaira mobile app will be required to use eNaira (for individuals and legal entities). Once authentication is complete, you are set to enjoy fast, cheap and secure transactions across borders.