The Central Bank of Nigeria (CBN) has announced the introduction of e-Naira, its digital currency, as a payment option for recipients of diaspora remittances. This move is part of the CBN’s efforts to enhance the payout of diaspora remittances by providing more flexibility and options to recipients.
The CBN’s new policy was outlined in a circular titled “Operational Framework for e-Naira Payment Option to Recipients of Diaspora Remittances,” dated June 15, 2023. The circular, addressed to International Money Transfer Operators (IMTOs) and the public, was signed by Dr. Ozoemena Nnaji, the Director of the Trade and Exchange Department at the CBN.
Dr. Nnaji stated that the guidelines in the circular would facilitate the payment of diaspora remittances to recipients who opt for e-Naira as their preferred payment method. According to the guidelines, IMTOs are required to apply for a one-time “No-Objection” from the CBN to facilitate payouts in digital currency.
The CBN will provide account details where foreign currency from IMTOs will be received. However, the CBN emphasized that the receipt of diaspora remittances in e-Naira is optional, and recipients can still choose to receive their payments in dollars. The option to receive payments in e-Naira will run parallel to the dollar payout.
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Impact on e-Naira Adoption
A recent report by the International Monetary Fund (IMF) highlighted the low adoption rate of Nigeria’s digital currency, with 98% of digital wallets remaining unused. The IMF suggested that integrating digital currencies like the e-Naira into the remittance process could drive its usage and adoption.
It appears that the CBN has taken this suggestion seriously. Making e-Naira a payment option for diaspora remittances is expected to increase the popularity and usage of digital currency. Although immediate substantial popularity might not be realized, the ease of making wallet-to-wallet transfers could attract diaspora recipients due to its convenience.
Granting direct or indirect access to IMTOs will enable the integration of e-Naira as a payment option on these remittance platforms, increasing its likelihood of being chosen among the available alternatives. This will drive the adoption, popularity, and integration of digital currency into the country’s payment infrastructure, ultimately reducing the cost of international transfers and transactions.
How eNaira Works for Diaspora Remittances
According to the framework, IMTOs are required to open merchant wallets through the CBN and pre-fund them with foreign currency. The CBN will then fund the IMTO merchant wallets with the equivalent amount in e-Naira.
The payment process involves the sender initiating a diaspora transfer with their chosen overseas IMTO and providing the beneficiary’s wallet information. After logging in, the IMTO debits the sender’s e-Naira merchant wallet and credits the beneficiary’s wallet with the equivalent amount in e-Naira, based on the foreign currency sent at the origin and the prevailing I&E window rate.
Alternatively, the CBN stated that IMTOs could integrate with the e-Naira portal on their platforms via the API provided by the CBN, allowing them to initiate transfers of the e-Naira equivalent of the foreign currency at the I&E window rate.
Conclusion
With the introduction of e-Naira as a payment option for diaspora remittances, recipients will have increased flexibility in choosing their preferred currency for receiving payments, while contributing to the wider adoption of digital currencies in Nigeria’s financial ecosystem.
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