Giant of Africa, Nigeria’s CBDC to launch a pilot programme on Independence Day

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Nigeria’s central bank digital currency, the eNaira, will enter pilot testing on October 1 with a tiered AML/KYC framework.

The Central Bank of Nigeria (CBN) is preparing to launch its digital currency initiative after four years of development. The unveiling is expected to take place on Oct. 1 in conjunction with the country’s 61st Independence Day celebrations.

Nigeria’s central bank digital currency (CBDC) idea comes despite the Central Bank of Nigeria’s (CBN) aggressive anti-crypto policies and the negative cryptocurrency views of various government officials. The digital naira is also coming at a time when its fiat counterpart has plunged to new lows, with the central bank enacting even tighter forex restrictions.

Details of the eNaira project circulated across commercial banks in the country show plans for strict identity verification mandates for utilizing the digital currency. The CBN plans to introduce a tiered ID verification system with different transaction limits for each tranche.

With CBDCs perceived as governments’ response to cryptos and privately-issued stablecoins around the world, there are fears that additional anti-cryptocurrency legislation would develop in Nigeria. Indeed, China ramped up its crypto crackdown as soon as its digital currency initiative entered the public testing phase.

Bitcoin (BTC) popularity in Nigeria is increasing as cryptocurrencies provide easier remittance vehicles, particularly for the country’s diaspora community in helping relatives and loved ones back home. Cryptocurrency also provides a way for the upwardly mobile and tech-savvy younger population to protect their wealth from the naira’s increasing depreciation.

CBN selects Bitt Inc

As previously reported, the CBN chose Bitt Inc, a Barbados-based fintech firm, as its CBDC technology partner. Bitt’s involvement in the creation of the Eastern Caribbean Central Bank’s DCash digital currency initiative, according to the CBN, had a crucial factor in its choice to select the company.

The CBN cited Bitt’s “technical competence, efficiency, platform security, interoperability, and implementation experience” as among the reasons why the Barbadian IT firm was the best candidate for the job in a news release released on Aug. 30. Indeed, Bitt was one of 15 companies considered by the central bank for the role of tech partner in the eNaira initiative.

All 15 companies in the evaluation process were reportedly accessed based on criteria such as Anti-Money Laundering protocols, technological efficiency, adoption, systems security architecture, and CBDC implementation experience, among others. Cointelegraph’s findings show that Bitt emerged with an aggregate score of about 82%, which was the highest among the 15 contenders.

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Bitt was also the only company to score about 80% and was among only two firms with relevant experience in live CBDC operations. This fact also reportedly played into the sandbox evaluation stage conducted by the evaluators under Nigeria’s Public Procurement Act.

The CBN will likely be looking to leverage Bitt’s experience in the national digital currency space as well as the company’s CBDC management protocols to establish its eNaira project. Bitt has reportedly licensed its Digital Currency Management System to the CBN for the eNaira CBDC project.

While launching DCash back in April, Bitt CEO Brian Popelka identified the baked-in interoperability protocols in the design of the Eastern Caribbean CBDC. These features may likely prove pivotal in the central bank’s efforts to foster easier remittance flows for Nigerians using the eNaira digital currency.

Proposed eNaira operations

The CBN emphasised the “unmistakable” worldwide CBDC trend among central banks while unveiling Bitt as its technology partner for the eNaira initiative. Indeed, discussions of sovereign digital currencies are becoming more common among central banks, with some governments already conducting pilot tests on CBDCs.

The CBN reportedly delivered a 57-page sensitisation paper to commercial banks in the country in late August outlining suggested operational models for the eNaira project. According to a draught of the guidelines, Nigeria’s CBDC, codenamed “Project Giant,” is intended to serve as a supplement to the country’s fiat currency. As such, the eNaira will maintain parity of value with the naira but will function as a non-interest-bearing CBDC.

In terms of the operating model for the eNaira, the CBN has reportedly proposed a hierarchical structure for the CBDC with the central bank at the apex of the pyramid, servicing financial institutions and government agencies that, in turn, provide the digital currency to merchants and retail consumers. Based on the draft guidelines, the CBN is looking to onboard both banked and unbanked Nigerians.

At least a third of Nigeria’s adult population is reportedly unbanked, with the CBN’s June 2018 estimate putting the figure closer to 37%. Of the over 47 million verified bank account holders in Nigeria, only a third are reported to be active in terms of banking transactions, possibly indicating that the majority of the country’s addressable market is still largely underbanked.

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While the CBN is eager to increase financial access in the country through the eNaira project, the CBDC will use a tiered identity verification scheme with a transaction limit tied to each tranche. Tier 1 (the unbanked) will be required to furnish National Identity Verified phone numbers as well as other ID credentials to qualify, according to the sensitisation document.

As previously stated, Tier 1 would have a daily transaction restriction of 50,000 naira ($120). Existing bank account holders will be classified as Tier 2 or Tier 3, depending on the level of their ID verification process.


Tier 2 and Tier 3 will have daily transaction limits of 200,000 naira ($487) and 1 million naira ($2,438), respectively. Beyond Tier 3 are merchants with a similar daily limit, but entities in this group will reportedly have no restriction on the amount of eNaira that can be withdrawn to their bank accounts daily.

CBN’s crypto ban

In February, the CBN banned banks and other financial institutions from servicing crypto exchanges in the country. As a result, Nigerian cryptocurrency traders are unable to fund trading accounts from their banks.

The central bank explained at the time that the measure was not intended to outlaw crypto trading in Nigeria, but rather to impede the flow of cryptocurrency within the country’s banking sector. In following Senate hearings, some politicians agreed with the CBN’s position, claiming that Bitcoin had rendered the naira nearly unusable.

Since the ban, numerous crypto and broader fintech critics have claimed that it does more harm than good. With the CBN preparing to launch its CBDC, there are fears that more stricter anti-crypto policies are on the way.

Chiagozie Iwu, CEO of Nigerian crypto exchange platform Naijacrypto, said that the emergence of harsher anti-crypto laws was a possibility, stating:

“Yes, we expect the CBN to champion even more anti-crypto policies, as it is clear it sees crypto as a hindrance to its monetary policy objectives even though data confirms that as a fallacy. Every crypto company in Nigeria should innovate ways to work within a restrictive system and think about jurisdictional changes.”

Fears of a crypto crackdown appear to be based on the expectation that Nigeria will follow China’s lead in banning cryptocurrencies in the aftermath of its own CBDC. Indeed, the CBN has already cited Chinese and Indian government regulations as rationale for its anti-crypto stance.

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To avoid being caught up in restrictive government regulations, Nigeria’s crypto community, according to Iwu, must shift towards jurisdictional independence. “Because cryptocurrency is by definition decentralised, the primary thrust should be towards more decentralised methods of employing blockchain innovations,” Iwu noted.

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