The Central Bank of Nigeria (CBN), also known as the Apex Bank has announced new guidelines for the regulation, creation, and issuance of a state-backed digital currency (e-Naira). The Central Bank Digital Currency (CBDC) is set to go live on October 1st, as planned.
The CBN described many design aspects of the central bank digital money in a paper delivered to commercial banks in the country. Nigeria’s CBDC codenamed “Project Giant,” will be pegged to the value of the naira. It also contains information about the responsibilities given to each of the stakeholders involved in the e-naira program.
The Apex Bank has stated that banks and other licensed operators may supply their wallets following the introduction of the eNaira initiative because it does not want to compete with them, stating that the e-Naira would be legal money for the entire country. The e-Naira will feature a non-interest-bearing CBDC status, a client transaction limit, and a value-based transaction limit.
The CBN will be in charge of the initial phase of the e-naira implementation, according to the article. This will entail the currency’s creation, distribution, redemption, and destruction. “Licensed financial institutions will be able to request cash or issue stable coins” in the second stage, dubbed the Financial Institution Suite. They’ll also “handle digital currency across branches, KYC, identity, and AML,” according to the document. At the third stage, the Nigerian government will get engaged, processing “digital payments transmitted to and received from citizens and businesses.”
The fourth stage is Low-cost payment and business management software, POS, remote payment solutions, internet capabilities, transaction analysis, and reconciliation will be provided by merchants.
The last stage is Consumer Suite for Retail. For a fantastic user experience, it has user-centred designs. The architecture will be scalable to allow for innovation, and it will have enhanced privacy and security measures.
The CBN document also detailed the expected process flows for international money transfer operators (IMTOs) and the projected e-naira, indicating that the digital currency will be integrated with the central bank’s forex control rules.
The CBN’s initial proposal is for the central bank to provide IMTOs with collateralized e-naira credit through its local banking partners. A second approach would be for the CBN to pre-fund IMTO accounts, although this method could expose the CBN to severe exchange rate risk. The CBN’s third alternative is to use the e-naira in the current Forex architecture, with abroad remittances being paid out in CBDC by the beneficiary in Nigeria.
Meanwhile, according to a separate report, the CBN is on track to release a wallet for its digital currency. According to the article, the CBN would be able to accomplish its aim of launching the e-naira by October 1, 2021, with the help of this wallet. This wallet, on the other hand, will not compete with established banks. Instead, it will “serve as a mechanism to transact value, awaiting when banks and other innovators can supply their wallets. “There will be three tiers to the wallet, which is also known as the Speed Wallet. Nigerians without bank accounts are placed in the top rung. Access will be granted only after the submission of “a passport photograph, name, locality, and date of birth.”
Anyone without a bank account can use the tier 1 wallet. It also has a 50,000 transfer limit and a daily cumulative balance of 300,000 dollars. A National Identity Number is the bare minimum to open this wallet (NIN).
The minimal requirement for tier 2 wallets users is an existing bank account with a linked bank verification number (BVN). Users are limited to sending and receiving 200,000 dollars each day, with a maximum balance of 500,000 dollars.
Tier 3 wallet users have a daily transaction limit of $1,000,000, with a maximum amount of $5,000,000. To get this wallet category, you’ll need at least a BVN. On merchant-level wallets, transaction limitations are similarly set at $1,000,000 per day, while there are no limits on how much money individuals can have in their accounts.
There will be no charges on merchant services, user-to-merchant, or peer-to-peer wallet transactions and the e-Naira has a non-interest-bearing CBDC status.
When users transmit money from digital wallets to bank accounts and make withdrawals at agent or merchant locations, there are no fees. Following the introduction, Nigerian banks will be able to ask all of their customers to register for the e-Naira, which will include the necessary validation and verification procedures. Banks will make onboarding easier and provide world-class customer care to help accelerate the adoption of e-naira.
Furthermore, the Central Bank emphasized that the wallet offered by its institution was only a stopgap measure to fulfil the deadline, as banks and other licensed operators are free to supply their wallets and the Central Bank did not want to compete with banks.
Nigeria’s central bank has stated that NIBSS and other switching platforms will continue to be significant as part of the digital currency plan and that current infrastructure may be integrated and utilized in the e-Naira implementation.
The e-naira system will be subject to extensive security inspections as a National Critical Infrastructure, and all data and personally identifiable information (PII) will be maintained outside the ledger and not held on the ledger.
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