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According to the CBN, the proposed central bank digital currency will have parity of value and will function as a non-interest-bearing CBDC.
The Central Bank of Nigeria (CBN) has released preliminary rules for its planned digital currency, e-naira.
The CBN described many design aspects of the central bank digital currency in a sensitisation document distributed to commercial banks in the country (CBDC).
According to the document obtained by Cointelegraph, Nigeria’s CBDC would be known as “Project Giant” and will be tethered to the value of the naira.
Thus, the e-naira will offer parity of value but will not be an interest-bearing currency. The e-naira will run alongside the country’s fiat currency, with the CBN responsible for issuing, distributing and redeeming the digital currency among other monitoring and management functions.
Based on the sensitization document, Nigeria’s CBDC will function under a tiered Anti-Money Laundering and Know Your Customer (AML/KYC) structure with different transaction limits.
According to reports, the bottom of the AML/KYC pyramid will include unbanked residents who will be required to disclose their national identity-linked phone numbers for verification. Users in this category will have a daily transaction limit of 50,000 nairas (about $120).
Citizens having bank accounts may fall into the second or third categories based on the amount of AML/KYC steps they have completed. The daily restrictions for these two levels will be 200,000 nairas ($487) and 1 million nairas ($2,438), respectively.
Third-tier users will very certainly be required to complete a physical AML/KYC verification process in addition to the bank verification number criteria specified for tier two.
Users classed as merchants will be subject to the same 1-million-naira limit as tier three users, but they will have no restrictions on the amount they can send to their bank accounts.
Indeed, the CBN intends to enable fee-free transfers between e-naira wallets and bank accounts for a variety of transactions. The zero-fee structure is most likely a way to encourage the adoption of the digital currency, especially given the country’s complaints about the high transaction charges associated with mobile and digital banking.
The CBN document also provided anticipated process flows for international money transfer operators (IMTO) as well as the proposed e-naira, indicating plans to link the digital currency with the central bank’s FX control rules.
The CBN’s first alternative involves the central bank offering collateralized e-naira credit to IMTOs through their banking partners in the country. A second approach would be for the CBN to pre-fund IMTO accounts, although this method could expose the CBN to severe exchange fluctuation risks.
The CBN’s third alternative involves the e-naira operating in the current FX architecture, with foreign remittances cashed out in CBDC by the beneficiary in Nigeria.
The CBN intends to pilot the e-naira initiative in October, as previously reported by Cointelegraph. In June, Nigeria’s communications minister linked the government’s attempts to encourage blockchain adoption as a vital aspect of digital innovation in the country.
Ghana, Nigeria’s West African neighbour, is likewise making headway with its own CBDC project.