The President of Nigeria, Muhammadu Buhari, launched the Central Bank Digital Currency, eNaira, on October 25, 2020, making Nigeria the first country in Africa to intoduce a digital currency and one of the few countries in the world to do so. Many Nigerians have been confused about what the eNaira is and how it works since its inception.
As a result, the purpose of this article is to explain what the eNaira is, how it operates, and the benefits it provides to Nigerians.
What is the eNaira?
The digital or electronic equivalent of the paper naira that we are accustomed to using in transactions is known as eNaira. It is a form of payment issued by Nigeria’s central bank, and it has the same value as the paper naira we use in daily transactions.
Is the eNaira equal to a cryptocurrency?
eNaira and cryptocurrency are both based on blockchain technology, however, they are not the same. The CBN issues the eNaira, which has the same value as the actual naira and is backed by the Nigerian government. Cryptocurrencies are decentralized, meaning they are not backed by any government. Although cryptocurrency is volatile owing to market forces, the value of the eNaira will only rise and fall in proportion to the dollar in the same way that paper currency does.
How does the eNaira work?
To be able to access and use the eNaira, you must first have an eNaira wallet. The eNaira wallet is the digital wallet in which the eNaira is stored. Customers’ eNaira wallets will be created by financial institutions licensed by the CBN, and they will be responsible for ID verification and eNaira payment processing. These institutions will also have a treasury wallet where they will receive eNaira from the CBN and then distribute it to customers. Two people who have an eNaira wallet can execute eNaira transactions with each other, allowing them to save, transfer, and receive the currency.
Benefits of eNaira
The implementation of the eNaira will help Nigerians to live in a more wealthy and inclusive economy by encouraging financial inclusion among citizens. Many Nigerians own mobile phones but without bank accounts; with the eNaira, these unbanked citizens would be able to conduct cashless transactions.
According to the CBN’s Design Paper for the eNaira, the eNaira will provide a clear mechanism for the government to transmit direct payments to residents qualified for certain welfare programs more quickly than through other means without the use of a middleman.
Furthermore, the eNaira will assist the digital economy, a stable payment ecosystem, boost economic operations, lower the cost of processing cash, raise income and tax collection, and make cross-border transactions easier. All these will affect the Nigerian economy positively.
Similarly, the eNaira promises to boost in-bound remittances by offering Nigerians living abroad a cheaper, more secure, and faster option to send money home.
