Why Nigerian banks may not fare well with e-Naira digital currency ─Analysts

*Experts say the role of the Nigerian Deposit Money Banks will be to take responsibility for conducting KYC and AML/CFT compliance compatibility on merchant e-Naira wallets as well as monitoring illicit activity

Isola Moses | ConsumerConnect

Despite the global interest surrounding Central Bank Digital Currencies (CBDCs) among central banks, governments and the private sector, analysts have said that the much anticipated unveiling of e-Naira digital currency by the Central Bank of Nigeria (CBN) although a major step in digital banking will benefit consumers, but not good for the Deposit Money Banks (DMBs).

ConsumerConnect had reported the CBN, in a recent statement said it had concluded plans to launch its CBDC pilot scheme, christened e-Naira October 1, 2021, in technical partnership with Bitt Incorporated.

Bitt is a financial technology (FinTech) company that utilises blockchain and distributed ledger technology to facilitate secure peer-to-peer transactions.

The e-Naira is an electronic record or digital token of the Naira to be issued and regulated by the CBN.

It is expected to be a legal tender for the West African country, and has a non-interest bearing status, as well as a transaction limit for consumers.

According to analysts at Coronation Research, the concept primarily originated on the wave of the popularity of cryptocurrencies, such as Bitcoin, Ethereum among others, as it has also gained more traction, following the onset of the COVID-19 pandemic and a global need to distribute as well as efficiently track eco­nomic stimulus funding, prevent illicit activity and illegal transactions.

E-Naira, the experts stated, aims to bring the best of both worlds—the convenience and security of digital cryptocurrencies alongside the traditional banking system’s regulations, Independent report said.

The analysts said: “We understand that to use the e-Naira to transact, users need to download the speed wallet, validate their account on the wallet by using either their phone num­ber, national identity number (NIN) or bank verification number (BVN).

“In addition, users will be able to transfer money through peer-to-peer (P2P) transactions from their e-wallets to other wallet holders and person-to-merchant/business.

“The structure of the e-nai­ra is similar to a commercial bank account,” said the analysts.

However, analysts Coronation Research further noted that it is non-interest bearing.

They stated: “Excluding executing and managing digital currency tokens, the CBN would be able to gather, analyse and store data on e-Naira transactions.

“The role of Deposit Money Banks would be to take responsibility for conducting KYC and AML/CFT compliance compatibility on merchant e-Naira wallets as well as monitoring illicit activity.”

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