As Central Bank Digital Currencies (CBDC) are becoming increasingly popular around the world, a response to the global rise of digital payment solutions and a component of various central banks’ response to the influence of cryptocurrency in their respective countries, the Central Bank of Nigeria (CBN) wants Nigeria up to speed with development trends.

Last month, the CBN said it would launch the pilot scheme of its digital currency by October 1st, 2021. As the expected launch date approaches, the CBN recently sent a presentation to Nigerian banks, revealing more details about how the eNaira is designed and how it will operate. 

As reported by Nairametrics, the e-Naira would be a legal tender for the entire country. It will have non-interest-bearing CBDC status, a transaction limit for customers, and a value-based transaction limit. Participants in the e-Naira program are featured in five stages, which are as follows:

Monetary Authority Suite: The CBN will be handling the first product component that includes issuing, distributing, and redeeming the currency. Store data on a cloud server, monitor and analyse currency transactions.

Financial Institutions Suite: Licensed financial institutions can request currency or issue stablecoins, manage digital currency across branches, KYC, identify, and AML compliance capability.

E-government Suite: The government can efficiently process digital payments sent to and received from citizens and businesses. 

Merchants will provide low-cost payment and business management software, POS, remote payment solutions, online capabilities, transaction analysis, and reconciliation. 

Retail Consumer Suite feature user-centred designs for a great user experience. The architecture will be expandable to enable innovation; features advanced privacy and security. 

The report also showed the proposed transaction cost for the e-Naira wallet. The digital currency infrastructure does not charge for user-to-merchant transactions and P2P wallet transactions. It shall be the responsibility of Nigerian banks to promote and market the centrally issued digital currency as a cash alternative to existing and potential customers in support of CBNs goal for financial inclusion. 

To expedite the adoption of the e-naira, banks will facilitate onboarding and provide world-class customer service. Nigerian banks will be allowed to invite all their customers to register for the e-Naira. 

It is salient to note that the Central Bank stated the wallet provided by its institution was merely a stop-gap measure for meeting the deadline, given that banks and other licensed operators may provide their wallets since it didn’t intend to compete against the banks. The ‘Speed Wallet’ issued primarily to meet the October 1st deadline will function under a tiered Anti-Money Laundering and Know Your Customer (AML/KYC) structure with different transaction limits.

With the first tier, the speed wallet can be used by anyone who is unbanked. However, users will have to submit a passport photo, a name, birth date and place, address, phone number, and their National Identity Number (NIN). Users in this category will be limited to a daily transaction limit of N50,000 (about $120). And a cumulative balance of N300,000 is fixed each day.

An account with an existing bank is required for users of Tier two wallets. The user is limited to sending and receiving N200,000 (about $487)per day with a Cumulative Balance of half a million naira daily. A Bank Verification Number (BVN) is the minimum requirement for this level. Tier three allows daily transactions of a million naira (about $2,438), with daily cumulative balances of five million naira. To qualify, you need to have at least a BVN.

The Central bank has made it clear that NIBSS and other similar platforms will remain relevant; existing infrastructure can be integrated and leveraged in the e-Naira implementation. As a National critical infrastructure, the e-naira system will be subject to comprehensive security checks. And all data and personally identifiable information (PII) will be kept off the ledger and not be stored on the ledger.

CBN also announced its engagement with the global fintech company, Bitt Inc, as the technical partner of its digital currency. Bitt is a Barbados-based startup that led the development of the Eastern Caribbean Currency Union’s ‘DCash’ – the first digital cash issued by a currency union central bank. 

Speaking on the apex bank’s choice, Osita Nwanisobi, CBN’s spokesperson, said the selection of Bitt Inc. from among highly competitive bidders was influenced by the company’s reputation of technological competence, efficiency, platform security, and implementation experience. 

“In choosing Bitt Inc, the CBN will rely on the company’s tested and proven digital currency experience, which is already in circulation in several Eastern Caribbean Countries. Bitt Inc. was key to the development and successful launch of the central bank digital currency (CBDC) pilot of the Eastern Caribbean Central Bank (ECCB) in April 202I,” he said.

Written by Adekunle Agbetiloye

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