This post explained what eNaira is, benefits and the impacts of eNaira to the Nigerian economy, the features, Advantages and Disadvantages.
eNaira is a Central Bank of Nigeria-issued digital currency that provides a unique form of money denominated in Naira.
Nigeria recently became the first African country to introduce a digital currency. It joins the Bahamas and the Eastern Caribbean Central Bank in being among the first jurisdictions in the world to roll out national digital currencies.
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A digital currency is a means of payment or money that exists in a purely electronic form. Central bank digital currencies are issued and regulated by the nation’s monetary authority, or central bank, and backed by the government. They are different from existing electronic central bank money, which is provided by central banks but can only be used by banks and selected financial institutions.
When financial institutions pay each other, they pay in reserves from accounts held with a central bank. Before central bank digital currencies, the only way consumers could use money that is a direct liability of a central bank was with physical cash. Existing digital retail payment from customer deposits accounts in banks are based on money that is the liability of the institution providing the account, not a central bank.
A central bank digital currency is a direct liability on the central bank and is available to all households and businesses giving them access to electronic central bank money. It can be transferred or exchanged using technologies such as blockchain. Blockchain is a system of storing records of transactions across a network of computers. Nigeria’s digital currency will be the digital form of the Naira and will be used just like cash.
What is eNaira?
eNaira is a Central Bank of Nigeria-issued digital currency that provides a unique form of money denominated in Naira. eNaira serves as both a medium of exchange and a store of value, offering better payment prospects in retail transactions when compared to cash payments. eNaira has an exclusive operational structure that is both remarkable and nothing like other forms of central bank money.
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How will the eNaira work?
The eNaira will work as a digital version of the physical Naira.
Financial institutions licensed by the CBN will be responsible for ID verification, eNaira payment processing, and creating wallets for customers to hold their eNaira.
The eNaira wallet is similar to a bank account and is created in the same way; however, it will be a separate account that is not connected to an already existing bank account.
Transactions will be possible between two parties that both have an eNaira wallet, which allows you to store, send, and receive eNaira.
Benefits
The following are the benefits of eNaira:
- Growth: eNaira fosters Economic Growth by offering easier access to capital and financial services thereby increasing economic activities at low/no interest transaction rate.
- Monitoring: eNaira’s traceability limits its use for illicit or fraudulent purposes.
- Welfare: eNaira enables effective, equitable, and faster distribution of cash assistance to households and communities included in government Social Welfare Programs.
- Remittance: eNaira provides a secure and cheaper diaspora Remittance option and an increase in the speed of such transactions.
- Security: eNaira has a stronger security because it cannot be forged or counterfeited as a result of its unique identity and security structure.
- Revenue: eNaira aids Revenue collection by reducing cash handling costs.
- Trade: eNaira increases Local and International Trade by making transactions cheap, safe, quick, and better.
- Inclusion: eNaira provides Financial Inclusion by making financial services available to people or communities who do not have (enough) banking opportunity.
How Good is progress of eNaira?
While Emefiele was upbeat on take-up of the digital currency, Bloomberg reported that less than 0.5% of Nigerians are using the eNaira.
“For the moment, the eNaira continues to struggle, especially among the poorest communities it’s targeting,” wrote Anthony Osae-Brown, Mureji Fatunde, and Ruth Olurounbi.
The reasons they found for this included the need to educate Nigerians about the digital currency, lack of incentives for banks to market it and suspicion of the CBN’s project among millennials and Generation Z, the main users of cryptocurrency.
Many Nigerians have taken to putting their cash into cryptocurrencies such as bitcoin to protect their savings against naira depreciation – the value of the naira has almost halved against the dollar since January, helping to fuel surging inflation. But the eNaira, because it has the same value as the cash naira, does not afford this possibility of a safe haven.
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The Features of eNaira
The eNaira is crafted with interesting elements for modern solutions that pay keen attention to details.
- Sending/Receiving Money: Customers can now send and receive money faster, easily and at very minimal costs.
- Verifying Payments: Customers can verify their payments and look up their transaction history anytime, anywhere.
- Financial Institutions Transactions: Intra/inter financial institutions transactions are not only possible, they are faster and cheaper.
- Foreign Exchange Transactions: Customers can enjoy speedy transactions across boundaries and a hitch-free foreign exchange.
Advantages of eNaira
- It Has Legal Backing
- Financial Inclusion
- Low-Cost Payment System
- Ensuring Access to Legal Tender if Cash is Unavailable
- Not Volatile to Speculations
- Radical Competition to Big Tech Monopoly and Cryptocurrency
- Efficient Regulation
- Enhancement of Cross Border Payments and Remittances
Disadvantages of eNaira
- Does not Grow in Value
- No Interest
- Will Discourage Savings
- Risk of Fraud
Conclution
The eNaira is the Nigerian digital currency that is issued and regulated by the Central Bank of Nigeria. Its functionality delivers speedy, safe, and simple trading and transactional opportunities to customers and end-users: It is exchanged peer to peer, it is universal – anybody can hold it and It does not yield any interest.