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Understanding the proposed e-Naira

Early this year, the CBN had discredited the use of cryptocurrency in Nigeria. Later, it announced the introduction of e-Naira, which it said would be a legal tender in the country. ONYEKORMAKA ASABOR hazards an explanation of this digital currency to consumers

Last February, the Central Bank of Nigeria released a circular warning commercial banks of the risks inherent in the acceptance of cryptocurrencies. It reminded the banks that the digital currencies were at no time accepted by it as the regulatory body.

Heeding the warning, concerned banks consequently halted transactions to that effect.

Ostensibly assuring consumers of little or no hitch by the time the proposed digital currency is eventually launched for use on the country’s virtual space, CBN’s Director of Information Technology, Rakiya Mohammed, disclosed in a webinar with stakeholders on July 22 that the bank had been researching on the Central Bank Digital Currency since 2017, and assured that the bank would launch the pilot scheme on October 1, 2021.

According to her, the project is tagged ‘GIANT,’ while the e-Naira will be operated on the Hyperledger Fabric Blockchain.

The Hyperledger Fabric is an open-source project that acts as a foundation for developing blockchain-based products, solutions and applications. It uses plug-and-play components made for private enterprises.

By embracing what it once rejected, the CBN excited the collective curiosity of Nigerians, particularly those active in the market segment of the population, to be asking among themselves the rationale behind the volte face. The apex bank’s present position on digital currencies is also raising dust in the media, online fora, and perhaps even in conversations at relaxation joints.

Notwithstanding the buzz, the essence of e-Naira still eludes many people’s understanding, hence the need to beam the searchlight on it based on the information gathered from the apex bank.

In the light of the foregoing, here are things the consumer should know about Nigeria’s CBDC and how it affects them.

Proposed digital currencies

First, the CBDCs are going to be legal tender and considered CBN’s direct liability. They will be divided into two categories: retail and wholesale. Retail CBDC will be used as a digital extension of the currency by all persons and businesses, while a wholesale CBDC may only be deployed as a settlement asset in the inter-bank market by permitted institutions. This means that retail CBDC will be used in the same manner as banknotes to make retail payments (Peer-to-Peer and Business-to-Person), while wholesale CBDC will be used to enable transactions between financial institutions, including banks, and entities holding accounts with central banks.

In comparison, retail CBDCs are more suited for central banks in developing countries than wholesale, as they are focused on reducing the barriers to financial inclusion, but may limit the financial intermediation role currently played by banks. Wholesale, on the other hand, could prevent some of the more disruptive impact of CBDC on the financial sector, but may limit efficiency and broad access to CBDC relative to a retail model.

CBDC and cryptocurrency

CBDCs differ from cryptocurrencies by design, in that cryptocurrencies are built and operated on a decentralised blockchain, while CBDCs operate on a centralised network. In this case, the CBN will be the main controller. It can reconcile issued CBDC as well as withdraw and issue new one with modernised technical and security attributes.

Creation and deployment

After the apex bank had assessed and defined its goals for the project, the next step is to design the CBDC. The design entails the technological infrastructure needed to supply and manage the digital currency. After this, the next step is to undertake a feasibility and viability analysis using a proof of concept. Then, the CBN will make moves to educate the people and about the rollout of CDBCs, before finally implementing the e-Naira across the country.

After the creation and storage of CBDCs, they will be distributed to financial institutions and licensed service providers, who will, in turn, make them available to individuals and businesses.

Transactions with CBDCs can either be online or offline, as individuals will be able to use existing and future payment channels to transfer value.


According to CBN, the introduction of a CBDC has a lot of benefits to the economy, government and stakeholders, some of which are highlighted below.

The CBDC has the potential to reduce cash handling costs by five to seven per cent, deepen digital financial inclusion and promote the development of e-commerce.

E-Naira will promote formal cross-border payments for efficiency, convenience and affordability. It will also create a reliable mechanism to distribute fiscal stimulus to citizens, which is highly vital due to activities seen during the distribution of Coronavirus Disease palliatives.

The project would reduce tax leakages due to evasion and illicit money flows. It will also promote and support the implementation of government objectives.

Nigerians would experience a reduction in the overall indirect cost of cash on the broader community and reduce issues that come with handling physical cash.

It will create innovative opportunities in the financial system, as new business opportunities arise from emerging business models, financial products and services.

A two-tier model for CBDC will enable Public-Private Partnerships wherein the CBN designs an e-Naira and distributes it technologically through Regulated Financial Institutions.

E-Naira will create an opportunity to unlock new revenue and growth opportunities thereby generating a sustainable value pool by unlocking new market segments.