Central Bank of Nigeria announced plans to launch e-naira digital currency later this year after Nigeria banned banks and financial institutions from dealing in or facilitating transactions in cryptocurrencies in February.
August 31, 2021, | AtoZ Markets – The Central Bank of Nigeria (CBN) has provided preliminary guidance on issuing government digital currency and options for its use. AtoZMarkets gained access to a confidential document sent by the Central Bank of Nigeria to local commercial banks.
How will e-Naira digital currency be used?
According to this document, eNaira will be used along with the country's fiat currency and pegged to it in a 1: 1 ratio. The Bank of Nigeria will deal with digital naira issuance and distribution and transaction monitoring.
eNaira will not be interest-bearing - meaning that users will not be able to earn interest on digital naira deposits. To comply with AML and KYC rules, the state cryptocurrency of Nigeria will operate within a multi-tier structure. The first level will cover citizens without access to banking services. They will be required to provide their phone numbers to verify their identity.
The daily limit for digital naira transactions for this category of users will be 50,000 naira ($120). Nigerian citizens with bank accounts can get to the second or third level, depending on the passed KYC stages. Users of these two levels will be able to conduct daily transactions with the state cryptocurrency in the amount of 200,000 naira ($487) and 1 million naira ($2,438), respectively.
Most likely, third-level users will have to go through physical identity verification in addition to the bank account verification required to access the second level. Restrictions are also set for merchants - their daily digital naira transaction volume should not exceed 1 million naira, but they will be able to send any amount of digital currency to their bank accounts. No fees will be charged for digital naira transactions, allowing seamless transfers between eNaira wallets and bank accounts.
Ways to integrate eNaira with international money transfer operators
In addition, the Central Bank of Nigeria has proposed several ways to integrate digital naira with international money transfer operators. Under the first option, CBN can provide them with secured loans in eNaira through their local banking partners.
The second option provides for the pre-financing of the accounts of these operators, although this may entail significant risks due to exchange rate fluctuations. According to the third scenario, eNaira could be used to exchange foreign currencies so that Nigerians can receive overseas transfers converted to the digital currency of the central bank.
As AtoZMarkets reported, CBN announced in July that a pilot project to test digital naira is slated to launch in October. The government believes that the launch of the central bank's digital currency will be an integral part of digital innovation in Nigeria.
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