Nigeria’s central bank issues draft guidelines for eNaira
eNaira, the proposed digital currency for Nigeria, has received a green signal from the country’s central financial institution, the Central Bank of Nigeria (CBN), in the form of preliminary guidelines for the upcoming currency.
The CBN has issued fresh guidelines in a sensitization document to all commercial banks in the country, outlining several features for the design and architecture of the central bank digital currency (CBDC).
Nigeria’s CBDC, named “Project Giant”, will be pegged at the value of naira.
The sensitization document suggests that Nigeria’s CBDC will function in accordance with a Know Your Customer (AML/KYC) system and a tiered Anti-Money Laundering structure, having different transaction limits.
The bottom of the KYC/AML pyramid will mainly be composed of unbanked citizens for whom providing their national identity-linked contact numbers will be mandatory for bank verification. For this category, the daily transaction would be limited to 50,000 naira (roughly $120).
Depending on the number of KYC/AML steps completed, the second and third tiers would be citizens with bank accounts. Daily transactions for these categories would be limited to 200,000 naira ($487) and 1 million naira ($2,438), respectively.
As per the document, a physical AML/KYC verification process would be mandated for tier three users, in addition to the national identity-linked contact numbers verification process.
According to reports, eNaira will not be an interest-bearing currency, although talks are around that it would offer parity of value. The currency will run alongside Nigeria’s fiat currency with CBN as the central organization responsible for issuance, distribution and redemption of the eNaira. CBN would also look after its management functions.
Users under the merchants’ category would be allowed for a daily limit of transactions not exceeding the 1 million-naira limit but for sending money to other bank accounts; they wouldn’t be bound to observe any additional restrictions.
In fact, CBN is aimed at ensuring seamless transfers between bank accounts and eNaira wallets with nil fees for several types of transactions. Its zero-fee structure is likely to incentivize the adoption of digital wallets.
The CBN document sent to commercial banks has also offered procedures for international money transfer operators (IMTO) and eNaira’s plans of integrating with the central bank’s forex control policies.
As of now, CBN would oversee the provision of collateralized eNaira credit to IMTOs through their banking partners across the country. An alternative option to this is that the CBN would pre-fund IMTO accounts. However, this method might accompany significant exchange fluctuation risks.
CBN has also offered a third option that involves eNaira operation in the current forex architecture, where overseas remittance is slated to be cashed out in CBDC by the beneficiary in Nigeria.
The eNaira project is scheduled to pilot in October, according to confirmation by the CBN. The country’s communications minister had said in June that CBN’s pilot project reflected the government’s efforts in driving blockchain adoption as an integral part of digital innovation in Nigeria.