Types of Currencies: The Emerging eNaira

The eNaira is a CBDC, i.e. Central Bank Digital Currency issued by the Central Bank of Nigeria, as a ledger tender. This is the digital form of Naira, and it would just be used like Naira.

CBCD, as I have written earlier, means Central Bank Digital Currency is a virtual form of a nation’s currency. The main advantages of CBDCs are that they promote financial inclusion and simplify the implementation of monetary and fiscal policy.

Let look at the types of currencies. Since 2008, we have increased the number of currencies in existence. Here are the types of currencies that are currently known:

 

1. Fiat Currency

Fiat currency is what we call cash – the paper money issued by the government. This type of currency gives the government control over the economy because it can control how much money is printed. Most modern-day currencies like Naira, USD are fiat currencies.

 

2. Digital Currency

Digital currency is a term for representing different types of currencies that only exist in electronic form, from virtual currencies to cryptocurrencies.

 

Virtual Currency

This is a type of digital currency; they are intangible currency and are often and only used within games.

 

Crypto-currency

A cryptocurrency is a digital currency that can be used to pay for goods and services, and it is different from virtual currency because it has value. It uses an online ledger with solid cryptography to secure transactions.

 

CBDCs

CBDCs are Central Bank Digital Currencies. They are the virtual or digital format of the fiat currency of a country. CBDCs are the government response to the cryptocurrencies that threatens the financial ecosystem. It is under this group that the eNaira falls.

Currently, around 81 countries are looking at having their CBDC, according to Atlantic Council. Five are fully launched, 14 are in the pilot project, 15 are in the development stage, 33 are in the research stage, six are inactive, one was cancelled, three are in the other.

The five countries fully launched their CBDC are The Bahamas, Saint Lucia, Grenada, Saint Kitts & Nevis, Antigua & Barbuda. 

The e-wallet is digital storage that holds the eNaira. The e-wallet is required to access the eNaira. 

The reasons why some countries launch their CBDC varies from one economy to another - some want to replace private cryptocurrencies, others want to be part of the new ecosystem.

 

Now, let look at the features of the eNaira.

 

The core feature of the eNaira is about ease of use and efficiency while also bearing in mind the security of the users. This is not the only feature of the eNaira. They include:

 

• Unified Payment System: You can move money from your bank account to your e-wallet account with ease.
• E-wallet Management: You can monitor your e-wallet, check your balance.
• Contactless payment: You can make in-store payments using their e-wallet by scanning QR codes.
• Peer-to-Peer Payment: This allows you to send money to someone else through a linked bank account or card at a minimal cost.
• Foreign Exchange Transaction: You can enjoy fast transactions across boundaries and a hitch-free foreign exchange.

 

The eNaira is the same as Naira, just a digital representation of Naira. However, there is a significant difference in Naira being controlled directly by local banks, e.g. Access bank, GTBank, Zenith Bank, etc. In contrast, eNaira is managed now by the Central Bank of Nigeria (CBN), and all eNaira transactions are free compared to the regular Naira transactions.

The eNaira is not the same as Bitcoin, Etherum, etc., because Bitcoin is a cryptocurrency, not a digital currency issued by the government. So, for instance, the eNaira will have the same value as the regular Naira.

 

How will the eNaira affect the Nigerian economy?

From the view of the citizens, we still don't see how the eNaira will benefit the economy. Still, according to CBN, the eNaira will enable them to have more data to formulate better macroeconomic policies, so from the government's view, it is to better the lives of the citizens.

 

We will see whether eNaira is the way forward or Nigeria just beating around the bush after the eNaira has been launched if at all it would be launched.