In October, their central bank governor said that Nigeria is planning to set up a cryptocurrency, the so-called ‘e-naira.’
In February, Nigeria prevented its banks and financial institutions from trading in cryptocurrencies or facilitating them.
Governor Godwin Emefiele of the central bank said that the “e-naira” will operate as a wallet for customers to hold their bank account with existing funds.
How does e-naira work?
In value like Bitcoin or other cryptocurrencies, e-Naira will not grow or plummet.
It’s interesting that eNaira works the same way as Naira. The difference is digital. The first one. The Naira will remain the same as the stable coins linked to the dollar. The value of the eNaira remains the same.
“CBDC’s suddenly won’t turn around your fortune,” said Chuta.
The eNaira is attached to the Naira and therefore retains the Naira value.
Owonibi confirms Chuta’s position, stressing that eNaira ‘does not provide inflation insulation.’
In the main, stablecoins maintain their value in the same way. A stable coin is a volatility-immune cryptocurrency. They have the same value as fiat. They have reverse assets, such as commodities or foreign currency, as part of Investopedia. In the eNaira case, the Naira is supported.
Will eNaira be linked to current bank accounts?
No, eNaira is created regardless of bank accounts. According to Owonibi, financial institutions create wallets which create customer identification via an application product interface (API).
Chuta on the other hand says the CBDC wallets are somewhat tricky to connect with current bank accounts. While not certain, he believes that the bank verification numbers (BVN) should be linked to the wallets. “A person could have two identities without that,” he says.
However, in China, the digital Yuan does not have any relationship with the current banking data. The Deputy Governor of People’s Bank Of China (PBOC), Fan Yifei, says to CNBC that the current accounts of the banking industry may not be connected to digital Yuan bags.
Can eNaira be monitored by the government?
Yes, on Hyperledger Fabric Blockchain the government can monitor all eNaira transactions.
Chuta tells Techpoint Africa that the government issues a CBDC to keep its own monetary sovereignty. The government will lose that control if cryptocurrency such as Bitcoin or Etherum gains more traction. ENaira is therefore a way to retain control.
He acknowledges that the government “unfortunately” directly sees and controls everything that happens with eNaira.
“How clear are you at that point about the privacy crossroads of citizens?”
These are some of the questions Owonibi has asked the CBN, but he has no answer. It shows that the Chinese Government has stated unequivocally that digital Yuan transactions are closely monitored. Maybe Nigeria can go along with that.
There remain several unanswered questions
Nobody knows what to expect until the eNaira pilot scheme begins in October. Owonibi admits that he has several unanswered questions about the way cross-border payments work, how privacy will be guaranteed
He is hoping to get clarity, coming October.