Project Materials

ISSUES AND RISKS ASSOCIATED WITH THE NIGERIAN DIGITAL CURRENCY (E-NAIRA)

Chapter one

INTRODUCTION

1.1 Background of the Study

During the 306th Banker’s Committee Meeting in July 2021, CBN Governor Godwin Emefiele announced that the CBN would begin working on a digital currency, and that same month, a press briefing and a private webinar were held to explain how the digital currency would be designed and when it would be implemented.

During the briefing, Rakiya Mohammed, Director of the CBN IT department, stated that the CBN has been interested in a digital currency since 2017 and has been conducting its own research.

She said that the project’s name is “Project Giant” and the digital currency will be called eNaira. She also mentioned that the CBN decided to develop the eNaira on a DLT using the Hyperledger Fabric Blockchain.

During the webinar and press briefing, the CBN stated that it intended to use the eNaira for cross-border trade facilitation, financial inclusion, monetary policy efficacy, better payment efficiency, and revenue tax collection, among other things.

The apex bank also stated that it expects the eNaira will improve FinTechs’ operational efficiency and product development. The CBN reaffirmed that the eNaira will not replace the old payments system and that it would simply function as an assistant to it, and announced that by 1 October 2021, the eNaira will be accessible for use.

In August 2021, the CBN displaying its commitment to come up with its self-imposed date, sent a presentation to commercial banks in Nigeria which covered several parts of the eNaira.

In the presentation, the CBN described the operating model of the eNaira, the participants in the project, a high-level summary of the use cases of the eNaira, the role banks will play under Project Giant, and other important concerns regarding the project.

The CBN stated during the presentation that the eNaira is a National Critical Infrastructure that will be subject to daily extensive security reviews, and that no personal data will be maintained on the Hyperledger Fabric Blockchain.

During the presentation, the CBN also talked about how Nigerian banks will integrate their consumers into the eNaira ecosystem.

The financial landscape in Nigeria is never static. New services and products are constantly created, changing the way Nigerians engage with Financial Institutions (“FIs”) and the Nigerian monetary and payment system.

Automated Teller Machines (“ATMs”) and Point of Sale (“PoS”) Terminals were once thought to be cutting-edge technology. Today, Nigerians with bank accounts may also have a debit card, allowing them to travel without cash and utilise ATMs and PoS terminals.

Furthermore, with the establishment of the Nigerian Interbank Settlement System (“NIBSS“), which serves as Nigeria’s central switch, internet banking was introduced, allowing Nigerians to transfer money to another customer in minutes rather than standing in long queues at banking halls to achieve the same goal. The development of mobile banking and mobile money has made the banking procedure appear less onerous.

These payment systems and techniques presently serve as the backbone for the Payment Infrastructure in Nigeria, and it appears that the Central Bank of Nigeria (“CBN”) plans to build additional extensions to support and complement the infrastructure through the creation of