eNaira: All you need to know

eNaira: All you need to know

Nigeria was the first African country to implement a digital currency recently. It joins the Bahamas and the Central Bank of the Eastern Caribbean as one of the world’s first jurisdictions to implement national digital currencies. Nigeria’s digital currency will be a digital version of the naira, and it will function similarly to cash.

What is a Digital Currency?

A digital currency is a kind of payment or money that exists entirely in the digital space. The nation’s monetary authority, or central bank, issues and regulates digital currencies, which are backed by the government. They differ from existing electronic central bank money, which is given by central banks but may only be utilised by banks and a number of other financial institutions. When financial institutions pay one another, reserves from central bank accounts are used.

Consumers could only use money that was a direct responsibility of a central bank with physical cash before central bank digital currencies. A central bank’s digital currency is a direct liability of the central bank that provides electronic central bank money to all families and businesses.

Digital money issued by a central bank is not a cryptocurrency. Most countries do not recognise cryptocurrency as a currency because it is not a widely accepted mode of payment. The new currency will not be a tangible replacement for the Naira, but rather a digital representation of it.

Is eNaira equivalent to Bitcoin?

No, it is not. The eNaira is a government-issued digital money, unlike Bitcoin, which is a cryptocurrency.

The eNaira, for example, will have the same value as the Naira. As a result, its value will not fluctuate as much as Bitcoin, indicating that it is not a good idea to invest your money to grow. The eNaira simply makes it easier to conduct digital transactions without the need for physical cash.

What is the purpose of eNaira?

The eNaira was launched for a variety of reasons. According to the Central Bank, its purpose is to:

  • encourage and make financial inclusion easier
  • support a payment mechanism that is dependable
  • enhance the accessibility and usability of Central Bank money
  • The eNaira’s implementation will enable peer-to-peer payments
  • permit citizens to receive direct welfare payments
  • facilitate remittances from the diaspora
  • lowering the cost of cash processing
  • permit citizens to receive direct welfare payments
  • Improving the effectiveness of cross-border payments.

What Impact will the eNaira have on the economy and transfers?

It’s yet unknown how the eNaira will affect the Nigerian economy, if there would be any impact.  However, CBN expects that, among other things, the eNaira will considerably boost financial inclusion, payment processing, and tax collection.

Cross-border trade is predicted to expand as a result of the eNaira, which could benefit the Nigerian economy. It’s still unclear how eNaira will handle cross-border transactions. It’s still a huge question for many analysts. One thing is certain, though. Physical Naira will not be replaced by the eNaira.

Conclusively, the eNaira’s successful launch could pave the way for regional monetary union in Africa, as well as a regional central bank digital currency.