The Central Bank of Nigeria (CBN) has announced the introduction of its digital currency – eNaira, as a payment option to recipients of diaspora remittances. The apex bank says the move is part of its efforts to liberalize the payout of diaspora remittance.
The new policy was contained in the bank’s circular titled: “Operational Framework for eNaira Payment Option to Recipients of Diaspora Remittances,” and dated June 15, 2023. The circular was addressed to the International Money Transfer Operators (IMTOs) and the public, and signed by the bank’s Director, Trade and Exchange Department, Dr. Ozoemena Nnaji.
Dr Nnaji said the guidelines contained in the memo would facilitate the payment of proceeds of diaspora remittances to recipients who choose eNaira as a payment alternative.
Under the guidelines, the IMTOs are required to apply for a one-time “No-Objection” to pay out in the digital currency from the Central Bank of Nigeria (CBN).
The bank shall also provide account details where foreign currency from IMTOs shall be received. The CBN, however, stressed that the receipt of proceeds of diaspora remittances in eNaira remained optional, adding that the option of the digital currency payout shall run concurrently with the dollar payout.
Read also: IMF says 98.5% of eNaira wallets unused despite increased usage during cash scarcity
What this means for eNiara adoption
Recall that the International Monetary Fund (IMF), in a recent report released on the adoption of Nigeria’s digital currency, said that the adoption rate was still very low with a whopping 98% of the digital wallets unused.
In the report titled ‘Nigeria’s eNaira, One Year After’, the IMF said network effects suggest the initial low adoption spell would require a coordinated policy drive to break it. According to it, if the adoption of digital currency is to be significant, then it requires some form of strategy between it and mobile money infrastructures.
Among the policy strategies the Fund suggested was the implementation of digital currencies like the eNaira as part of the remittance process. It thinks this will effectively make it an unavoidable route that would drive its usage and adoption more. This is what the IMF said:
“First, granting foreign IMTOs direct or indirect access to the eNaira is an important consideration. In case of direct access, foreign IMTOs will be able to own eNaira merchant wallets and use them for intermediate remittances by, say, selling the eNaira to the remittance senders (in exchange for foreign currency)—who can then make a wallet-to-wallet transfer to domestic recipients.”
“Cost savings from integrating CBDC—as a bridge vehicle—in the remittance process may also be substantial”, it says
It seems the CBN has heeded that suggestion and taken the bull by its horn. Going by the statement above, one could expect that the eNaira as a payment option for diasporans will increase its popularity and usage. Although its popularity might not be immediately substantial, the ease and ability to make wallet-to-wallet transfers may become appealing to diasporans because of its ease.
Also, granting of direct or indirect access to IMTOs will enable the integration of the option to these remittance platforms, thus increasing the possibility of it being used as a payment option in the face of many alternatives. This successfully drives the adoption, popularity and integration of the digital currency into the payment infrastructure of the country. This will also successfully help in reducing the cost of international transfers and transactions.
Read also: eNaira sees a 63% spike in transactions amid Naira scarcity, yet most Nigerians remain indifferent
How eNaira will work for diaspora remittances
According to the framework, IMTOs are required to open merchant wallets through the CBN and pre-fund the CBN account with foreign currency. The central bank will consequently fund the IMTO merchant wallet with eNaira equivalent of the foreign currency earlier pre-funded by the latter.
The CBN added that the payment process entails the sender starting a diaspora transfer with an overseas IMTO of choice while supplying information about the beneficiary’s wallet. After entering their login information, the IMTO debits their eNaira merchant wallet and credits the beneficiary with the eNaira equivalent of the foreign currency sent at the origin at the I&E window rate.
Alternatively, the apex bank noted that IMTO could integrate with the eNaira portal from its platform via API provided by CBN and initiate the transfer of eNaira equivalent of the foreign currency sent at the origin at the I&E window rate.
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