The Central Bank of Nigeria
(CBN) is set to launch the eNaira on October the 1st. Let us take a closer look
at the eNaira, what it means for you, and how you can position to take
advantage of its launch.
What is the e-Naira?
The e-Naira will be a digit
representative of the paper Naira currency issued by the Central Bank of
Nigeria. The eNaira will be a “complementary” legal tender in Nigeria, having
the same exchange value as the Naira, and maintain a “parity of value” with the
Naira. The e-Naira will not earn any interest to holders. The e-Naira is built
on a blockchain open ledger technology. Creating the eNaira on the blockchain
means you cannot have a duplicate or fake eNaira. Each eNaira note will be
unique.
Is the e-Naira a Stablecoin?
A stable coin is a
cryptocurrency backed by reserves. The keyword is reserved, but what kind of
reserves? Stable coins are backed by holding an equal equivalent of FIAT money
like the US dollar. FIAT means government-issued but usually not backed by any
commodity, e.g., gold. Thus a stable coin like USDT is tied to a currency, the
US dollar, and maintains a stable exchange value. Note, stable, not immovable.
The eNaira technically is linked to the FIAT Naira, but is the Naira stable?
Well, not exactly. To be a stable coin, the eNaira has to be tied to a currency
like the US Dollar or Euro or even the Yuan.
How safe is the e-Naira?
Think of the e-Naira in this
way; you want to send N100 to an uncle in a remote village without a bank
branch. A common practice is to buy mobile phone recharge cards of that value,
load them to your phone, and text your uncle. Your uncle can then go to any
phone card retailer and discount his N100 mobile phone credit for N95. The
mobile retailer can redeem the call credits and pay cash because he trusts the
person doing the exchange; however, he cannot tell if the mobile numbers are
real.
The eNaira is designed to solve
this verification risk by assuring all holders that each eNaira is a valid
token. This authenticity is achieved by building the eNaira on the blockchain.
Thus instead of buying phone credits, I will debit my bank account for N100,
convert to eNaira, and transfer it to my uncle. My uncle can spend the funds
directly from his phone or transfer and get cash. Every retailer is more likely
to accept the eNaira because it can’t be easily faked.
