Since the launch of the Nigerian eNaira, a lot of people have been looking forward to how it will truly benefit their business especially those doing digital businesses in Nigeria.
On Monday 25 October eNaira was unveiled at State House by President Muhammadu Buhari. During the time, he stated that the digital currency would increase remittances, foster cross-border trade, improve financial inclusion and enable the government to make welfare payments more easily.
A statement from him read….
“I am delighted,”.… “to officially launch the Central Bank of Nigeria digital currency called the eNaira. And in so doing we have become the first country in Africa and one of the first in the world to introduce a digital currency to our citizens.”
In all, what people truly want to know is how this will benefit the digital businesses in Nigeria. This is I decided to create this post to further help you understand the benefits of eNaira for digital businesses in Nigeria.
What is eNaira?
Just like the physical Naira, this is a digital currency issued by the Central Bank of Nigeria (CBN) to serve as a legal tender electronically or simply put, in digital form. The aim is to complement the Naira in digital space by having the same exchange value as the Naira and also having equal value with the physical Naira. The interesting thing is that the eNaira is built on a blockchain open ledger technology, this will help prevent duplication or creation of fake eNaira because each will be unique just like other cryptocurrencies. This is the country’s version of a Central Bank Digital Currency, which is created and backed by central banks in several countries.
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What Makes eNaira Different from Cryptocurrency?
Unlike other cryptocurrencies, for example, Bitcoin, Ethereum, Litecoin, etc, that are created by individuals, the eNaira is a digital currency issued by the government of the country and is a legal tender that has the same value as the physical Naira. Meaning, users can directly access the currency from CBN rather than going through a commercial bank. The digital currency is pegged against the physical Naira which means its value will not fluctuate due to market influence at a different rate from the Naira.
Since the value of the eNaira is being pegged to the physical Naira, and the eNaira is also non-interest-bearing, you may not be able to utilize it for wealth growth, investment, or trading as with other cryptocurrencies trading in exchange. The eNaira basically utilized to offer stability to the physical Naira and makes it easier and simpler to facilitate transactions digitally without the need for physical cash. Doing this will help you eliminate or limit the use of commercial banks as intermediaries in transactions, all you will need for a seamless transaction is the eNaira Wallets.
How will the Digital Currency operate in practice?
Users can access the digital currency only through the eNaira Wallets which is the digital storage that holds the eNaira. This Wallet is held and managed on a distributed ledger where you can access, hold and use eNaira for any transaction.
The supply of the digital currency will be through CBN and they will do this through their stock wallet. The supply will go through CBN to the intermediaries which in this case are financial institutions in the country where it will then be distributed to individuals.
The financial institutions will retain a treasury wallet that will be used for collecting eNaira from the CBN. Licensed financial institutions will oversee ID verification, eNaira payment processing, and the generation of wallets for customers to keep their eNaira. With the eNaira app, customers can identify a bank of their choice, connect their bank accounts and perform transactions.
How the eNaira Will Benefit Digital Businesses in Nigeria.
There are several benefits that you can get from using the eWallet whether you are a business person or an individual just trying to use it for simple daily transactions.
The use of the eNaira wallet will help you eliminate the third party during transactions, this means you will not be spending unnecessary transactions charges that may be affecting the revenue of your business.
With the wallet, rather than customers transacting with money kept and maintained by a bank, the eNaira will be directly held by customers in their Wallets; this is like holding a digital version of your physical cash. And can be used without third-party interference. The elimination of the intermediaries is expected to reduce the cost and time of transactions and also ease cross-border transactions.
As a business owner, this will also help you lower costs as compared to commercial digital banking as daily transfers between accounts will be at no cost to the holder of the account. This will help to ease costs for traders and those who deal in general commence regularly.
We know how hard the pandemic struck not just Nigeria but the world at large, causing businesses and even banks to close down especially in most rural areas. And up till now, those banks are yet to be operational leading to declining in the use of banking systems from the affected areas. The eNaira is a great innovation to help reach more people in the areas where banks and financial institutions have failed to cover.
It also helps reduce fraudulent transactions and illegal money deals such as money laundering due to the unique ID of the eNaira.
The digital currency will be made available to everybody both individuals, and organizations including households, businesses, non-governmental organizations (NGOs), religious institutions, Nigerians in diaspora, and governments at all levels.
This is to ensure that the eNaira feeds the Nigerian economy and provides greater value for everyone including business owners.