By Enyinnaya Stella 

The Unveiling of eNaira by the Central Bank of Nigeria (CBN) which they described as “one of the milestones of a long journey", has made history today as it becomes the first African country to digitize its currency. 

But the eNaira take-off is causing unease in the banking sector even as the concept note has admitted the project could unsettle banks as it comes with disintermediation risk.

Amid the anxiety, some experts have warned that eNaira is just one of the disruptive technologies banks will need to accept and adapt to; to avoid being overrun.

The launch will put Nigeria on the global Central Bank Digital Currency (CBDC) tracking map as the fifth country to launch a centralised national electronic money after the Bahamas first unveiled its version in 2017.

Nigeria’s unveiling was earlier scheduled for October 1, 2021, but the apex bank said it was postponed owing to other national activities to mark the country’s 61st Independence anniversary. President Muhammadu Buhari will do the unveiling at the State House, Abuja.

The project kicks off as the global community embraces the race for CBDC creation. Today, about 10 central banks are in the pilot stage of their CBDCs, while six have executed proof of concept. Some countries, including China, are positioning their digital currency project as the lead strategy for internationalising their currencies.

Central banks around the world, most notably in China, the United States and the United Kingdom, are actively considering whether to adopt or create their own CBDC. The geopolitical pressures are high, with China far enough along in trials that it plans to roll out this new currency for international visitors as early as the 2022 Winter Olympics in Beijing.

Other countries, keen to embrace the “tech revolution,” are vying to be early adopters of CBDCs. South Korea, Sweden, Cambodia, the Bahamas and Hong Kong are among various countries with pilot programs.

South Africa also recently announced a trial of CBDCs for cross-border payments, just as Ghanaian central bank is seeking to make its digital currency, the e-cedi, available to offline users soon.

CBDCs, like other electronic money, including privately issued stable coins and cryptocurrencies, leverage blockchain technology to facilitate peer-to-peer (P2P) transactions and remove intermediaries.

A source, who has monitored the unease among top bankers, admitted that it was too early to conclude that eNaira would reduce the volume of bank transactions, but disclosed that “bank executives are extremely worried that a widespread adoption of eNaira could reduce the volume of businesses executed by banks and transaction revenues.”

“The eNaira payment system will be compliant with AML/CFT guidelines to ensure integrity of the financial system. To achieve this, CBN has adopted an account-based CBDC. Through this option, CBN will be able to identify users on the platform using the identified frameworks: Bank Verification Number (BVN) and National Identity Number (NIN). 

“To facilitate this process, customers will have the option to choose their preferred banking partner during the onboarding process and customers will be linked to that bank. The linked banks will as such be responsible for performing AML/CFT checks on the users and ensuring overall compliance,” the apex bank said in the concept note.

There is, however, no sufficient information in the document to show how banks will make revenues from their role in the implementation of the digital naira.

The top two categories of users are required to have account numbers with BVN and bank accounts, but the second top users are tied to maximum daily spending of N200,000 while their maximum daily cumulative balance is N500,000.

The least users, who are only required to hold telephone numbers while awaiting the National Identity Number (NIN), are entitled to an upper daily spending limit of N20,000 and a cumulative balance of N120,000. This category refers to millions of financially excluded Nigerians.

The document also captures another layer of users with both phone numbers and NIN. Individuals in this group could spend as much as N50,000 daily and accumulate N300,000.