The CBN just announced that they’ll be releasing
some guidelines on the e-Naira aka Nigeria’s digital currency and in this video, that’s what
we’ll be discussing. If you’ve been online at all in any moment and you of course live in Nigeria
or maybe are Nigerian, well, you definitely would have seen something about the e-Naira and this
should concern you…so why is it being launched and what should you know about it.
This is the video
to watch. In this video, I’ll explore what the e-Naira is and is not, what you should know about
it and what the effects might actually be for you or every single Nigerian both positive
effects and negative effects. It is kind of a big deal. If you’re new to the
channel, welcome and if you’re returning, welcome back. I’d love if you could hit that like
button so more people get to see that value we’re sharing here in this video. Welcome to another
Finance Friday video in the series and this episode is brought to you by VULTe, find out
how you can be one of 5 people who gets 10,000 cash for free when you watch althrough this
video. Without further ado, let’s get to it. What is the e-Naira? So first off, what is even the e-Naira?
And what is the e-Naira not.
The e-Naira is simply Nigeria’s Digital Currency. It’s
the Naira but Digital. As simple as that. It is not a cryptocurrency, but it uses technology
for Digital Currencies from a company called Bitt Inc. It is also called a CBDC which means Central
Bank Digital Currency and countries like China have one too. Everyone who lives in Nigeria will
surely have to spend Naira to access basic goods and services, the same way everyone in the US has
to spend dollars, the same way British people have to spend pounds, and Ghanians have to spend Cedis.
By the way, Ghana is also creating its own Digital Currency. I didn’t know that until I started
to research for this video so yeah. The e-Naira is set to launch in October, the 1st of October
and that day is also the day of Independence for Nigeria so it just made sense that they would
want to do it then.
Or Maybe I’m wrong. But that would really be interesting to see though?
What do you guys think? Leave a comment below. Why did Central Bank Propose this? In May, I made a video about the e-Naira or
Nigeria’s Digital currency, you see, just 2 months before May or in February of 2021, the CBN stopped
a major link in cryptocurrency, which is banks. It had the effect of banning cryptocurrency because
of course in the multiple circulars, Nigeria did not regard cryptocurrency as money and they said
that banks must not touch cryptocurrency or enable it in any way, shape or form.
Like I said, 2
months later, the Governor of the Central Bank of Nigeria, the CBN governor mentioned that Nigeria
will be considering its own digital currency. At the height of the “crypto ban”, Nigeria
was like the 2nd in the world with regards to volume of cryptocurrencies being
traded on Paxful’s platform, it showed that the parallel market was and is
still very strong and present in Nigeria and there was alot that was putting pressure on the value
of the Naira currency. Basically one major way Nigeria earns foreign exchange apart Oil is
remittances or people sending in Dollars, pounds and such into Nigeria, with Bitcoin,
you won’t be able to control who’s sending what in and out of the country and if
it took over, it could render financial institutions somewhat less useful. However,
I don’t see that happening any time soon as they definitely have to work hand in hand.
way they currently are now, but we never know. We are also facing a major dilemma on the exchange
rate front. A lot of the Finance Friday videos have covered this in depth and at this point,
we have hit a 530 Naira to $1 all time high. One of the reasons we couldn’t get a $1.5 Billion
Dollar loan in Nigeria from the World Bank in June of 2021 was because of our exchange rate system.
There are 2 kinds as far as I know, the Fixed and Floating Exchange rate system.
on a Fixed Exchange rate that also has a parallel market. What this means is that the fixed
rate is the official rate, right now it’s 411 and the parallel rate is 530 as at the time of
making this video. The world bank linked the loan approval for Nigeria to having a predictable
exchange management system. In contrast to this, a floating exchange rate is one that is determined
by demand and supply and many experts think that the 530 naira to a dollar is a closer rate than
411. However, Nigeria would not accept this as it could be bad for the economy and a devaluation
just seems like an unfavorable strategy.
This brings us to today, in September, less than
a month before the e-Naira launch in October, and Nigeria has started to lay down some
ground rules. But before we talk about that, who is even making this e-Naira?
Did the CBN magically become so advanced in the art of digital
money making? Well, not really. Who is making the e-Naira? A company called Bitt, Inc in partnership with
the Central Bank would be creating this digital currency, this e-naira. Let’s bring our favorite
neighbors in, Ghana which is also considering its e-Cedi, it’s being built by a competitor
of the guys Building the ones for Nigeria. I’ll leave a link below if you’re interested
in that. It’s by a German securities printing company called G+D. The company building
ours is from Barbados and they’re Bitt, Inc Who or what is Bitt Inc and why are they the
ones building Nigeria’s digital currency? Bitt Inc.
Is a fintech company based in Barbados
that uses blockchain and distributed ledger technology to enable safe p2p transactions
with seamless mobile money. Now if all that sounded like rubbish to you…Basically, their
main objective is to develop payment systems for people, companies, banks and central banks
using blockchain technology as well. The reason the CBN gave for the selection of Bitt Inc
was they they were infact selected from highly competitive bidders, I believe the
number of bidders were over one hundred but they claimed to have chosen the company due to
tested and proven digital currency experience which is already in circulation in
several Eastern Caribbean Countries. They also stated that they were chosen
because they helped successfully launch the Central Bank Digital currency for the
Eastern Caribbean Central Bank in April 2021.
So they have infact minted digital
currency for a country before. One thing to note is that the company Bitt Inc
would have to register in Nigeria as a Limited Liability Company. Basically a business, and the
Central Bank will infact own a stake, a portion or shares in their Nigerian company. CBN currently
does own shares in some of the other companies managing our financial payment system like
NIBSS or Nigeria Inter-Bank Settlement System. I think this helps so they can have a vote in
how the currency for the Nigerian people is being managed and one private company would not have the
upper hand in determining the lives of our people. Anyway, if you’re liking this video so far, a
thumbs up would really be amazing as it would help more people become aware of what we’re sharing
here. Now, what is the e-Naira process like? What is the e-Naira process? First things first, there will be different
levels or tiers of wallets and there will be launch stages.
I’ll talk about these two things in
a bit but first, how would this happen? Let’s talk about Stages. In Stage 1, The CBN says it will be
responsible for issuing, distribution, redemption and destruction of the e-Naira currency. In the
second stage, we have the Financial Institution Suite where licensed financial institutions
like Banks will be able to request and issue stable coins.
So yes, the e-Naira will have a
stable rate and not be able to bear interest like cryptocurrency. When comparing it to something
like the dollar for instance, the e-Naira will equal the prevailing dollar rate at the time, and
probably not the parallel market rate but that’s a far stretch when you consider the existence of P2P
trading. The CBN says that at this seconds stage, these licensed financial institutions will also
manage the digital currency across branches, they will do the KYC or Know Your Customer registration
and AML or add anti-money laundering compliance. What does this mean for commercial
banks? Well commercial banks right now have a large number of products.
I’ve been able to use many, VULTE Similarly, with an app like VULTe, you
get to do a lot of these things already but now, with the e-Naira, it’s more
like the Government’s super app.
In the 3rd Stage, the Nigerian government
will become more involved and will process digital payments sent and received from citizens
and businesses. At Stage 4, we should expect Merchants who are expected to provide low-cost
payment and business management software, POS, online transaction and reconciliation.
The 5th and Last Stage would be the Retail Consumer Suite which will focus on the
architecture of the digital currency. What about the Wallets now, there’s also
different levels or tiers of the wallets. Because the deadline is really close, there will
be an existence of what is called a Speed Wallet. These wallets are to enable CBN meet their
October 1st Deadline. They say it’s not a competition to existing banks but another
means of transaction until a time where other banks can plug into the Digital Wallet
with their own infrastructure or technology. So what are the different wallet levels? The first tier allows users with no bank account
to use the Speed Wallet.
However they must submit a passport, their name, place of birth, gender
address and phone number. This first tier will have a daily limit of N50,000 for sending
and receiving and the minimum requirement for using a first tier wallet is a phone number
which will be validated as a National Identity Number or NIN, so if you haven’t registered
for your NIN, you might probably want to do so. The second tier or Tier Two wallet
requires that the users must own an account with an existing bank. At this level they can
send and receive 200,000 daily with a cumulative balance daily of 500,000, aka the total sum
of transaction you can make in a day would be 500,000.
The minimum or lowest requirement
is a BVN, or bank verification number. The third tier allows for daily send and receive
transactions up to 1,000,000 with a cumulative balance daily of 5,000,000, meaning you can not
go beyond 5,000,000 for anything else apart from sending and receiving. The minimum requirement
is the same as the 2nd tier and that’s your BVN. There’s also a last tier which isn’t referred to
as the 4th tier but called the Merchant Level. It allows this user to send and receive 1,000,000
however, there’s no limit to the amount of money that can move to their bank accounts. The minimum
requirements are as the tier 2 and 3 however, there will be more KYC that is linked
to the Anti Money Laundering or AML and Combating Financing of Terrorism or CFT. Advantages So what are the advantages of this? Let’s start
with the fact that it’s going to be really fast with regards to payments. It’s also going
to be very cheap. Cheap for both the CBN and the users. For the CBN, they
don’t have to deal with the logistics of moving paper money up
and down or printing paper money. They could cut costs by a third if they minted a
third of their allocation to digital currencies and for us the users it could be cheap or maybe
even have no cost of transfers on some wallets. Like the First Tier wallet up to the merchant
wallet basically has no cost at all.
However, experts have pointed out that the CBN hasn’t
clearly stated if there would be a charge between an existing bank account which already charges you
money and an e-Naira wallet which doesn’t. Does it mean if I send money from my normal bank account
to the e-Naira wallet I get charged but when I send from e-Naira to a normal account I won’t
get charged? Nothing has been stated for now. Another advantage is that Anti Money Laundering
(AML) would be baked directly into this system and because of the robust KYC or Know Your Customer
level of the BVN, we should be able to hit the ground running as fast as possible..
will participate of course, I will, for science purposes but I’m sure it will not be out of the
ordinary. It will surely be transparent, I hope. Concerns With regards to the concerns experts
have. It’s Control. The Director of Monetary Policy in the CBN says that the
CBN will have some control in the beginning. Remember when I said earlier in my first
video about the Nigerian Digital currency that the CBN might compete with commercial
banks or have a centralized power that gives them authority to do and undo with immediate
effect. They also mention this in the 3rd stage as well as I explained earlier in this video.
It could also phase out big players that have billions of dollars in investment and payment
Infrastructure because now, the CBN can even issue money directly, why would they need them?
However, it might also not be the case as these companies might help with distribution but still
if it catches on, there would definitely be a mass effect and it could disrupt many big
companies or some banks at the worst case.
The other thing is Data Protection. The
information of tens of millions of Nigerians will be in the hands of the government and shared by a
single private firm. However, the CBN has a stake and they definitely will have deciding power over
the sharing of these details and with the obvious advancement of technology, I hope we can’t
get identities compromised or worse stolen. One of the many reasons mentioned was Financial
Disintegration. Financial Integration is simply the linkage or how close our economy is
to the world’s economy, or economies of neighboring or regional countries, for us
it’s how we measure up against our African countries… According to one of the CBN directors,
Nigeria is quite financially disintegrated. Financial Integration is measured by capital
inflows, stocks of assets and liabilities, interest rates and how financially open an
economy is. We are unfortunately not there yet and the implementation of the e-Naira, if not
done right can probably widen the inequality gap not just relatively and also slow down the rate
of getting more citizens financially included. I also have my own personal concerns or concern?. Please at least make the user interface
beautiful because if it’s not.
If it’s not.. Haha, well that’s all I have
for now. Thank you for watching, make sure to like this video if you
found it useful, also leave a comment letting me know your thoughts and letting
me know if you have downloaded VULTe, winners will be credited into their VULTe
accounts when they download and it’s verified users only that get them. Alright, thank you
for watching! I’ll talk to you in the next one..