By Uche Usim
With the launch of the long-awaited Central Bank Digital Currency (eNaira) last Monday by President Muhammadu Buhari, one word that should resonate with Nigerians is “e-wallet” because it is the pivot on which all transactions of the digital currency revolve. Without the e-wallet, you are still clung to the old order and the eNaira functionalities will elude you.
Tech experts describe the latest banking innovation as a historic game-changer designed to open a new world of innovations, especially for people in rural areas, who are at the bottom of the banking pyramid. With the eNaira, they can pay money from a created e-wallet (pair-to-pair), with eNaira as long as they have Near Field Communication (NFC), wifi, and Bluetooth. Most importantly, it attracts zero transaction cost for the first 90 days after the launch.
Payment is just a phone to phone transfer that is safe and secure. The initial zero charges also apply when users send money from their wallets to bank accounts and make withdrawals at agent or merchant locations. You can transfer your cash to eNaira and vice versa. And since it is powered by blockchain technology, transactions on this platform enjoy some level of security such that even if one’s phone is stolen, the transaction is safe. You can transfer funds from your regular accounts to your eNaira. For instance, if you had N100,000 in your bank account, you can transfer N30,000 to your eNaira and be left with N70,000. If you owned no bank account hitherto, you can walk into a bank and use your cash to open an eNaira account and transact your business, rather than moving about with cash with all the concomitant risks.
Already, thousands of anxious Nigerians have downloaded the eNaira mobile app from the playstore of their smartphones and are good to go. More so, 33 banks have been fully integrated on the eNaira platform. Again, 2,000 customers are onboard and 120 merchants registered on the portal, while the website records 2.5 million daily visits. The sum of N500 million has been successfully minted by the apex bank and N200 million issued to financial institutions for the takeoff. To guarantee massive success of the new initiative, economic analysts have called for massive enlightenment, especially among the unbanked and the illiterate, since the eNaira has the capability of bringing Nigerians who have no bank account but have a phone into the formal financial economy. With the eNaira, salary payments and exact payments for goods and services can be concluded without the use of the internet. It eliminates the need for ‘change’ during purchases. A carpenter can accept payments on his phone, store them in his e-wallet, and make transactions with any vendor.
How to own an e-wallet and transact with eNaira
The first thing is to visit your bank to register. Those in the rural areas can visit their nearest banks to register. Once you register, you will receive an invitation code after which you need to download the eNaira app and then enter the invitation code received from the bank.
After this step, you will need to enter minimum identification details (i.e., NIN, BVN, or know your customer (KYC)/anti-money laundering (AML) information, depending on the customer tier you are. You would also need to enter other identification details such as name, place, date of birth, phone number, passport photograph, email and password. Once your identification is validated, you will receive a notification from your bank after which you can log in to your account.
Individuals can fund their eNaira wallet by transferring physical money from their regular bank (e-banking app); and then the cash holder (bank) hands over cash to an eNaira verification agent/bank branch/CBN shared agent network expansion facilities (SANEF). Thereafter, the agent transfers the cash equivalent to the customer’s eNaira wallet.
For dollar remittances, the eNaira will be integrated into the CBN’s forex process, and this is to make it easier to receive remittances to Nigeria. These transfers could be from the CBN crediting eNaira directly to the International Money Transfer Organisation (IMTO). A Nigerian abroad sending $100 to his relative can debit his US bank account and credit $100 to an IMTO, who will buy eNaira from their corresponding Nigerian bank. The $100 is converted to eNaira instantly at a far lower transfer fee which is a real benefit and a significant advantage the eNaira will enjoy. Simply put, the Diaspora regular account holder, such as HSBC, logs in to your customer forex bank account; transfers funds into international money transfer operators’ (IMTO) forex bank accounts such as Western Union; and then transfers from IMTO eNaira wallet to consumer eNaira wallet.
Transaction limits
Daily transaction limits for Tier 0, which is just a phone number without a verified National Identity Number, has been set at N20,00 with a balance limit of N120,000.
The tier 1 wallet is open to anyone without a bank account. It also comes with a transfer limit of ₦50,000 and a cumulative balance of ₦300,000 fixed daily. The minimum requirement to open this wallet is a National Identity Number (NIN). For tier 2 wallets users, an existing bank account with a linked bank verification number (BVN) is the minimum requirement for this level. Users are restricted to sending and receiving ₦200,000 daily and having a balance of ₦500,000.
Tier 3 wallet holders can transact up to ₦1,000,000 daily with the cumulative balance set at ₦5,000,000. At least a BVN is needed to get this wallet category. Transaction limits on merchant-level wallets are also set at ₦1,000,000 per day, though there are no limits to how much users can have in their accounts. With eNaira formally unveiled, Nigerian banks are to invite all their customers to register for the eNaira guided by all necessary validation and verification processes.
What Nigerians need to know about the eNaira
It is not a cryptocurrency like Bitcoin and Ethereum, despite being a national asset running on blockchain technology. Bitcoin and other cryptocurrencies are encrypted transactions conducted individually and not a sanctioned operation of the CBN. This is unlike the eNaira that is backed by law and insured by the Nigeria Insurance Deposit Corporation. Simply put, the eNaira is a digital representative of the paper naira currency already in circulation that is issued by the CBN. This naturally makes the eNaira a “complementary” legal tender in Nigeria, having the same exchange value as the existing naira, and maintaining a “parity of value” with it. The CBN has urged Nigerians not to expect their eNaira to serve as a hedge against inflation because the value will be similar to the physical naira. Another major attribute of the eNaira is that transactions are only free for an initial 90-day post-launch window, unlike what many think.
The apex bank in a framework titled, ‘eNaira Circular and Guidelines’ released on the launch date stated that it will revert to its guide on applicable charges by banks and other financial and non-financial institutions at the end of the stated period. It said: “The charges for transactions that originate from the eNaira platform shall be free for the first 90 days commencing from October 25, 2021, and then revert to applicable charges as outlined in the Guide to Charges by Banks, Other Financial and Non-bank Financial Institutions.” Arising from the aforesaid, Electronic Funds Transfer below N5,000 is charged N10; N5,001 – N50,000 is charged N25 and for above N50,000, a N50 charge is associated.
Another issue worthy of note is that the eNaira will not earn any interest to holders. Creating the eNaira on the blockchain means you cannot have a duplicate or fake eNaira. Each eNaira note will be unique. To ensure security of funds, the eNaira is expected to have two-factor authentication and other measures. The CBN, in a note published on its website, stated that eNaira wallet offers a great way of making purchases with retailers on-site, transferring or sending money while tracking rewards programmes. So, Nigerians can link the e-wallet to their bank account or pay as you go with a prepay option and a promise of an embedded security token system that makes information unreadable to fraudsters. In a nutshell, the eNaira is a critical national infrastructure fortified with comprehensive security and intelligence systems.
Checking inflation
On eNaira’s effect on inflation, experts say it would check roundup inflation. For instance, coins in Nigeria are scarce; thus, most merchants round up their prices to match with available currency, usually notes. This rounding up induces an artificial rise in prices because any cost-push does not cause the price hike but other factors, for example, selling eggs for N100 instead of N88. With the e-Naira, it becomes possible to transfer the exact cash price in the marketplace, especially in rural areas. This reduces the possibility of “round-up inflation.”
Again, the eNaira has a low-cost advantage when compared to FIAT (normal currency). The daily transfers between accounts are at no cost to the account holder. Lower transaction cost is a massive incentive as traders will pay no fees for withdrawals and deposits to and from their bank account. No transaction fees reduce the cost of commerce while improving safety.
Historic
The eNaira is a CBN initiative developed in technical partnership with Bitt Inc, the first company in the world to digitize a national currency on a blockchain; thus creating the first synthetic CBDC. With the launch, Nigeria, ahead of the United States, United Kingdom and others, became the sixth nation in the world and the first African country to own and operate a digital currency. The other five countries that have fully launched a digital currency are the Bahamas, Saint Kitts and Nevis, Antigua and Barbuda, Saint Lucia, and Grenada.
Reaction to launch of eNaira
Dr. Omobola Adu, a Research Analyst at GDL, had this to say: “I think the eNaira is a good initiative in the sense that in the next couple of years, the global economy should be moving to digital currencies. We’ve heard announcements by various countries on plans to start their digital currency, so we can say that the CBN is moving in the right direction.”
Dumebi Udegbunam, Fixed Income trader at UBA, hailed the move by the apex bank as a formidable step as the nation navigates into the 4th industrial revolution. Dr Adesola Adedutan, the Managing Director of First Bank Nigeria said that there are significant differences between CBDCs and cryptocurrencies, citing that CBDC provides a platform for the governments to leverage blockchain technology to maintain a centralised and institutional role over the currency.
Affy Okoh, a civil servant said; “I’m waiting for the eNaira. As long as it’s cheaper and safer to transact with it, I welcome it with all my heart. “The world is going digital and Nigeria cannot afford to lag behind.”
Abubakar Usman, a trader had this to say: “I don’t know what they are talking about. What is eNaira? My people in the north don’t do anything other than cash. The CBN and the banks should educate us seriously on this matter. I’m not ready for it. I want cash.”
Bimbo Adelakun, a student said it is a good development so long as it is safe and secure.