The Central Bank of Nigeria is empowered under the Central Bank of Nigeria (CBN) Act 2007 and the Banks and Other Financial Institutions Act (BOFIA) 2020, to issue legal tender currency, promote a sound financial system and promote the development of electronic payments system. In furtherance of its power/mandate, the CBN embarked on the “Project Giant” on June 24, 2021, a project to produce and issue Nigeria’s official Central Bank Digital Currency (CBDC) known as “eNaira”.
Worthy of note is that Nigeria is the first African country to launch its official Central Bank Digital Currency (CBDC). Notable amongst countries that have launched their CBDC is China which is regarded to be by far the most advanced country with a digital currency called Chinese digital yuan and the Central Bank of Bahamas which has also moved into full implementation of the CBDC called The Bahamas Sand Dollar.
The CBN has provided draft guidelines on the issuance and operation of eNaira in Nigeria by all financial institutions and users to provide a better understanding of the legal and regulatory framework on the proposed eNaira. Against the backdrop of the foregoing, this article x-rays the apropos characteristics of the proposed eNaira and its operations in Nigeria per the provisions of the Draft Guidelines.
MEANING OF eNAIRA
The eNaira which is the short form of ‘electronic Naira’ is the digital form of the Naira, issued by the Central Bank of Nigeria in line with the provisions of the Central Bank of Nigeria (CBN) Act. It is a digital currency that will be at par with the fiat naira (i.e. physical Naira notes). The eNaira is to complement traditional Naira as a less costly, more efficient, generally acceptable, safe, and trusted means of payment. In addition, it is to improve monetary policy effectiveness, enhance the government’s capacity to deploy targeted social interventions, and boost remittances through formal channels.
It should, however, be noted that the eNaira is in no way an alternative to the physical currency. It is to coexist with the different forms of money already in use in Nigeria (the Naira); hence the theme “Same Naira, more possibilities”. The eNaira will be exchangeable for other Central Bank Digital Currencies (CBDC).
DIFFERENCE BETWEEN THE eNAIRA AND CRYPTOCURRENCY
It is recalled that on the 5th of February 2021, the Central Bank of Nigeria (“CBN”) announced a ban on the buying and selling of cryptocurrencies through banks and other financial institutions in Nigeria via a circular.The introduction of the proposed eNaira seems to mislead the larger populace into believing that the eNaira is an alternative to the crypto that was banned. This belief is flawed, as the draft guideline clearly shows that the eNaira is not an alternative to cryptocurrency. It is a payment system designed to be at par with the physical Naira and not to replace the physical Naira. The eNaira is a Central Bank Digital Currency (CBDC) which is an alternative means of payment to cash. CBDCs and Cryptocurrency are not the same; the only similarity they share is that they are both digital and not physical in nature.
The most crucial difference between cryptocurrency and the eNaira is decentralization. Cryptocurrencies are often decentralized, and no company, organization, or government can control them. On the other hand, the eNaira is a government-controlled digital currency issued and managed by the Government. It is envisaged to be more stable than cryptocurrency as its value is to be at parity with the country’s official currency (Naira).
OPERATION OF THE eNAIRA
The eNaira operates through a platform known as the eNaira platform or Digital Currency Management System (DCMS) which will be administered by the CBN to mint and issue eNaira. The eNaira platform also hosts eNaira Wallets to be used for transactions by the different stakeholders which include the Financial Institutions (FIs), Ministries, Departments, and Agencies (MDAs), Merchants, and Consumers. Financial institutions are expected to integrate their back-end systems with the DCMS for efficient transfer of eNaira between bank accounts and eNaira Wallets.To detect and prevent fraud, Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) checks are to be conducted on the eNaira platform.
PARTICIPANTS/STAKEHOLDERS OF THE eNAIRA
There are five major participants in the operation of the eNaira namely:
- The Central Bank of Nigeria (CBN)
- The Financial Institutions (FIs)
- Businesses and Merchants
- Ministries, Departments, and Agencies (MDAs)
- Mint, issue, distribute, redeem and destroy the eNaira;
- Determine the technical, regulatory, and operational standards for the eNaira;
- Manage unresolved eNaira issues and complaints escalated from the FIs and disputes arising between FIs;
- Monitor compliance with applicable regulations; and
- Issue directives and review Guidelines on eNaira periodically as may be required.
(ii) The Financial institutions such as Banks, Other Financial Institutions, Mobile Money Operators are responsible for issuing eNaira to Customers, monitoring digital transactions under their institution and maintaining a treasury eNaira wallet for holding and managing eNaira on the DCMS. A suite called the financial institutions (FI) suite is the primary application used by the FIs to manage their digital currency holdings, requests, and redemption with the CBN.
The onboarding of FIs on the eNaira platform is to be done automatically by the CBN.The Financial Institutions (FIs) acts as intermediaries between the CBN and customers and are required to perform certain roles within the eNaira platform which includes:
- Facilitating eNaira Wallet onboarding for bank customers (merchants and customers);
- Integrating the eNaira wallet feature into their digital banking channels;
- Requesting eNaira from CBN for self and on behalf of its customers;
- Managing eNaira across its branches;
- Developing and/or updating reporting and internal frameworks to ensure compliance with KYC (know your customer) and AML/CFT requirements;
- Receiving and resolving customers’ complaints on eNaira; and
- Ensuring that eNaira enquiries and complaints are included in the periodic reports to CBN.
It should be noted that Financial Institutions are required to comply with the Money Laundering (Prohibition) Act 2011 (as amended), the Terrorism (Prevention) Act 2011 (as amended), and all subsisting anti-money laundering laws and regulations as may be issued by the CBN from time to time. FIs are also required to render returns to the CBN in line with the provisions of the Banks and other Financial Institutions Act (BOFIA) 2020 and as may be specified from time to time. To ensure sound risk management, FIs are required to put in place appropriate measures to address potential threats to their operations. They are also expected to implement additional risk management measures as may be prescribed by CBN guidelines from time to time.
(iii) Businesses and Merchants: Merchants are duly accredited individuals and non-individual (corporate/ institutions) authorized to conduct business in Nigeria. They are responsible for the following:
- Providing customers with alternative channels for making transactions using eNaira;
- Providing cashback services for customers;
- Publicising the option of eNaira payment for transactions at merchant locations; and
- Protecting their eNaira wallet credentials against fraudulent access
The onboarding of merchants on the eNaira platform is to be done by the FIs upon downloading the “eNaira Speed Merchant Wallet” from the app stores and fulfilling the requirements provided by the guidelines.
(iv) Ministries, Departments, and Agencies (MDAs): MDAs are allowed to receive revenue in eNaira and make payments in eNaira. The onboarding of MDAs on the platform is done by the CBN upon receipt of the appropriate mandate.
(v) Consumers who are the end-users of the eNaira are responsible for:
- Creating eNaira Wallets and funding it;
- Utilising eNaira as an alternative payment option for legitimate transactions;
- Protecting their eNaira wallet access credentials; and
- Notifying financial institutions in the event of fraud/complaints/disputes.
The onboarding of Consumers on the eNaira shall be self-service upon downloading of the “e Naira Speed Wallet” from the app stores and fulfillment of the requirements. The guidelines also provide that during the onboarding process, users have the option to disclose whether the eNaira wallet being created will be operated for self or as trustees.
The eNaira wallet is required to access, use and hold the eNaira. The eNaira platform hosts eNaira wallets for different stakeholders. The various wallets provided for by the guidelines are as follows;
- Stock eNaira Wallet: This wallet belongs solely to the CBN to warehouse all minted eNaira.
- eNaira Treasury wallet: This wallet is to be maintained by FIs to warehouse eNaira received from the CBN eNaira Stock Wallet. FIs are permitted to create eNaira sub-treasury wallets for branches tied to it and fund from its single Treasury eNaira wallet with the CBN. An FI may create eNaira branch sub-wallets for its branches. The eNaira branch sub-wallet shall be funded from the treasury eNaira wallet.
- eNaira Merchant Wallets: This wallet will be used only to receive and make eNaira payments for goods and services.
- eNaira Consumer wallets: This wallet will be created for each end-user of the eNaira to enable transactions on the Platform.
Notable among the provisions of the guidelines is that users of the eNaira are to be subjected to a tiered structure with the transaction and balance limits. The tiered structure includes Tier 0, Tier 1, Tier 2, Tier 3, and merchant. Tier 0 users whose documentation requirements include passport photographs, personal information, and telephone number have a transfer limit of ₦20,000 and a balance limit of ₦120,000.
Tier 1 users whose documentation requirements and that of Tiers 2 and 3 are as stipulated in CBN Circular on Tiered Know Your Customer (T-KYC) have a daily transfer limit of ₦50,000 and a balance limit of ₦300,000.
Tier 2 users are restricted to sending and receiving ₦200,000 daily and a balance of ₦500,000 and Tier 3 users can transact up to ₦1,000,000 daily with the balance limit set at ₦5,000,000. There are however no transaction or balance limits for merchants.
To identify every user or participant, the Tax Identification Number (TIN), National Identification Number, and/or Bank Verification Number (BVN) will be used as unique identifiers for all users and participants.
MEASURES PROVIDED TO PROTECT THE eNAIRA WALLET
To ensure the security and privacy of the eNaira Wallet, two-factor authentication and other measures are to be adopted. The eNaira Wallet users have the responsibility of ensuring the protection of eNaira Wallet login credentials and devices to prevent disclosure to third parties, and promptly reporting to Financial Institutions or eNaira helpdesk where there has been a loss/theft of device or compromise of user eNaira Wallet.
Banks are also required to ensure that eNaira users have access to an array of channels to report loss/theft of device or compromise/hack of user eNaira wallets. At a minimum, the guidelines provide that banks are expected to ensure that customers can report via:
- USSD channels;
- Internet banking platforms;
- Customer care phone lines; and
- In-branch customer care.
They are also required to develop a system to validate the identity of complainants; facilitate prompt placement of restriction on eNaira Wallets where a valid report of loss/theft of device or compromise/hack of user eNaira Wallet is made and make reports to the CBN on the number of reports received and actions taken thereon including timelines.
The guidelines provide for dispute resolution for complaints by users of the eNaira. Consumer complaints about the usage of the eNaira will be referred to the helpdesk of users’ preferred FI helpdesk. If unresolved by the FI helpdesk, it is to be escalated to the eNaira helpdesk for resolution. Complaints from Financial Institutions as well as disputes arising between Financial Institutions will be reported to the eNaira Helpdesk Team and resolved within two (2) working days. For disputes where one or both parties are unsatisfied with the resolution, the issue shall be referred to an arbitration panel as provided under the extant Arbitration and Conciliation Act or as may be defined by the Central Bank from time to time.
TYPES OF TRANSACTIONS ON THE eNAIRA PLATFORM
There are four types of transactions available to stakeholders on the eNaira platform provided by the draft guidelines. They are as follows:
- Consumer Transactions which include Person to Person (P2P); Person to Business (P2B) / Business to Person (B2P); Person to Government (P2G) / Government to Person (G2P); Cash or Bank account to eNaira wallet; eNaira wallet to cash or bank account; and any other services as may be approved by the CBN.
- Merchant Transactions which include Merchant/Business to bank account; Merchant/Business to Person (M/B2P); and Cash to eNaira.
- FI Transactions which includes FIs to CBN / CBN to FI; FI to Government / Government to FI; FI to Business / Business to FI; and FI to Customer.
- MDA Transactions which include MDAs to Person / Person to MDAs; MDAs to MDAs; MDAs to FIs / FIs to MDAs; MDAs to CBN / CBN to MDAs; and MDAs to Businesses / Business to MDAs.
It should be noted that the charges for eNaira transactions shall be in line with the Guide to Charges by Banks, Other Financial, and Non-bank Financial Institutions.
The CBN believes that the eNaira will make a significant positive difference to Nigeria and Nigerians, includingimproving the availability and usability of Central Bank money, supporting a resilient payment system ecosystem, encouraging financial inclusion, reducing the cost of processing cash, enabling direct welfare disbursements to citizens, increasing revenue and tax collection, facilitating Diaspora remittances, reducing the cost, and improving the efficiency of cross-border payments.
From the provisions of a draft guidelines on the framework for the operation of eNaira, it is clear that the eNaira is on the right step to achieving a cashless economy which is a shift in the existing framework for fiat currency in Nigeria advancing the boundaries of payments system in order to make financial transactions easier and seamless for every strata of the society.
In a press statement dated 23rd October 2021, the Central Bank of Nigeria announced the launch of the eNaira which was initially scheduled for October 1 but was postponed to be formally unveiled by President Muhammadu Buhari on Monday 25 October 2021. The CBN promised that “given that the eNaira is a journey, the unveiling marks the first step in that journey, which will continue with a series of further modifications, capabilities and enhancements to the platforms. The CBN will continue to work with relevant partners to ensure a seamless process that will benefit every user, particularly those in the rural areas and the unbanked population and the Bank will further engage various stakeholders as we enter a new age consistent with global financial advancement”. We, therefore, hope that the CBN keeps to its promise to ensure a seamless cashless policy in Nigeria.
 Section 2 of the Central Bank of Nigeria (CBN) Act 2007
 https://www.investopedia.com/understanding-chinas-digital-yuan- accessed on the 15th of October 2021
 https://beincrypto.com/bahama-central-bank-launches-milestone-digital-currency/ accessed on the 15th of October 2021
 Paragraph 1.0 of the Draft Guidelines on the E–naira accessible at https://www.enaira.gov.ng/
 Section 19 of Central Bank of Nigeria (CBN) Act 2007
 Paragraph 1.0 of the Draft Guidelines
 https://lawpavilion.com/blog/cbns-ban-on-cryptocurrencies-in-nigeria-a-review/accessed on the 16th of October 2021
 Paragraph 1.0 of the Draft Guidelines
 https://thecryptocurrencypost.net/cbdc-central-bank-digital currency/ accessed on the 15th of October 2021
 Paragraph 3.3 of the Draft Guidelines
 Paragraph 3.5 of the Draft Guidelines
 Paragraph 3.6 of the Draft Guidelines
 Paragraph 3.1 of the Draft Guidelines
 Paragraph 4.1 of the Draft Guidelines
 Paragraph 3.1 of the Draft Guidelines
 Paragraph 3.2 of the Draft Guidelines
Paragraph 5.1.1 of the Draft Guidelines
 Paragraph 4.1.2 of the Draft Guidelines
 Paragraph 10.0 of the Draft Guidelines
 Paragraph 14.0 of the Draft Guidelines
 Paragraph 11.0 of the Draft Guidelines
 Paragraph 4.1.3 of the Draft Guidelines
 Paragraph 5.1.2 of the Draft Guidelines
 Paragraph 4.1.4 of the Draft Guidelines
 Paragraph 5.1.3 of the Draft Guidelines
 Paragraph 4.1.5 of the Draft Guidelines
 Paragraph 5.1.4 of the Draft Guidelines
 Paragraph 6 of the Draft Guidelines
Paragraph 3.3.1 of the Draft Guidelines
 Paragraphs 3.3.2 and 18.104.22.168 of the Draft Guidelines
 Paragraph 3.3.3 of the Draft Guidelines
 Paragraph 3.3.4 of the Draft Guidelines
 Paragraph 10.0 of the Draft Guidelines
 Paragraph 10.4 of the Draft Guidelines
 Paragraph 7.0 of the Draft Guidelines
 Paragraph 3.4 of the Draft Guidelines
 Paragraph 12.4 of the Draft Guidelines
 Paragraph 12.2 of the Draft Guidelines
 Paragraph 15.0 of the Draft Guidelines
 Paragraph 8.4 of the Draft Guidelines
 Paragraph 9.0 of the Draft Guidelines
 Design Paper for The Enaira accessible at https://www.enaira.gov.ng/
 Central Bank of Nigeria Press Release dated 23rd October 2021 accessible at https://www.cbn.gov.ng/