Nigeria is on a speedy path to enhancing its payment system and increasing access to financial services with the planned launch of digital currency, also called eNaira.
A look at the Central Bank of Nigeria (CBN’s) evaluation that produced Bitt Inc as technical partner in the eNaira scheme showed due diligence and adherence to Public Procurement Act.
The rigorous vendor selection process that produced Bitt Inc evaluated 15 other companies before its emergence. Digital currency will accelerate Nigeria’s plan to bring financial services closer to the people.
New phase in the Nigeria’s digital payment industry is emerging with plan to begin usage of digital currency, also called eNaira by October.
But a key step to realizing the plan was Central Bank of Nigeria (CBN) appointment of Bitt Inc as technical partner in driving the scheme expected to bring financial services closer to the unbanked and underbanked.
Findings showed that Bitt Inc appointment as technical partner went through a rigorous vendor selection process in line with the Public Procurement Act, conducted by seven departmental directors and a Deputy Governor whereby 15 companies were evaluated.
Bitt Inc is also expected to register as a Nigerian company while the CBN owns shares in the financial technology company.
The evaluation was based on the following criteria: technology ownership and control; implementation timeline; efficiency, ease of adoption; support for anti-money laundering and combating the financing of terrorism (AML/CFT); platform security; interoperability; implementation experience.
From the evaluated 15 companies, Bitt came tops with an average score of 82.3 per cent. The scores for some other bidders were: Bitt- 82.3 per cent; InterStellar – 76.9 per cent; Zimbali- 76.4 per cent; G+D – 76.3 per cent; and EmTech -66.4
It also revealed that a sandbox evaluation followed the selection process to have a hands on experience with Bitt and G+D being the two companies among the top five who had either gone live or had deployed a pilot.
Bitt is a leader in the Central Bank Digital Currency (CBDC) industry, with subject matter experts at the intersection of technology and policy.
The company deployed its flagship product in regulated, collaborative, multi-stakeholder environments, including a live CBDC in four Caribbean countries, and digital currency deployments in Barbados and Latin America.
The Bitt DCMS for Eastern Caribbean Central Bank was vetted by the International Monetary Fund (IMF) and World Bank.
Also, the deployment in the Caribbean countries was driven by social impact, including financial inclusion, through special features for the unbanked, on/off-ramp through an accessible agency network, and the implementation of zero-cost mobile transactions.
The systems has patent-pending offline transaction capabilities, and the ability to integrate with other CBDC networks for cross-currency exchange.
Overstock, which has majority stake in the company, is a more than 20 year old publicly traded company (Nasdaq: OSTK) with over $200M invested in blockchain technology related businesses. Pelion Ventures, a 35+ year old VC firm, manages OSTK investments.
In addition, Bitt was the first company to digitise a national currency on a blockchain, thus creating the first synthetic CBDC, with the support of the Central Bank of Barbados Governor and the Minister of Finance.
“That system is still in operation today, and is integrated with the largest bill payment processor in the country and both major telcos.
“The Government of Barbados uses it to collect payments online. mMoney has grown to service thousands of merchants andmany more individuals within Barbados. It is clearly not a closed payment system.
“The main product, the Digital Currency Management System, licenced to CBN is not a closed payment system. The DCMS provides the Suite of applications for the monetary authority, commercial banks, merchants, and consumers (both, banked and unbanked),” it added.
A separate report also revealed that in March this year, ‘DCash’, was designed and developed by the international fintech company, Bitt, in partnership with the Eastern Caribbean Central Bank (ECCB) and it became the world’s first retail central bank digital currency (CBDC) to be publicly issued within a formal currency union.
The historic transaction was the climax of over two years of extensive research, consultations, planning, software development, operational training, merchant acquisition, customer service, and marketing achieved through collaboration with the ECCB, Bitt and multiple external stakeholders.
Speaking at the virtual launch, Bitt’s CEO, Brian Popelka, had said, “CBDCs are truly transforming the way that financial transactions are conducted around the world. This change brings significant benefits especially to emerging economies.”
CBN Governor, Godwin Emefiele had said the CBDC, otherwise known as the e-Naira, would bring about increased cross-border trade, accelerate financial inclusion, and lead to cheaper and faster remittance inflow.
He had said the digital money would lead to easier targeted social interventions, as well as improvement in monetary policy effectiveness, payment systems efficiency, and tax collection.
CBN’s Director, Corporate Communications Department, Osita Nwanisobi, explained, in a statement, that the e-Naira project had been a long and thorough process for the apex bank following its resolve in 2017 to digitise the local currency after extensive research and exploration.
Nwanisobi said CBN’s decision was in line with an unmistakable global trend in which over 85 per cent of central banks were considering adopting digital currencies in their countries.
The CBN pointed out that the selection of Bitt Inc. from among highly competitive bidders was based on the company’s technical competence, efficiency, platform security, interoperability, and implementation experience.
The statement said, “In choosing Bitt Inc. the CBN will rely on the company’s tested and proven digital currency experience, which is already in circulation in several Eastern Caribbean countries.
“Bitt Inc. was key to the development and successful launch of the Central Bank Digital Currency (CBDC) pilot of the Eastern Caribbean Central Bank (ECCB) in April 2021.”
Emefiele had recently hinted that a national digital currency would be launched in October. The apex bank had also said the digital currency would be treated as a critical national infrastructure to protect it from operational and cyber-security risks.
Understanding eNaira operations
The CBN had shared operating model and prototype design of digital currency codenamed eNaira with banks and monetary policy authorities.
The Project Giant, unveiled by the CBN to banks, sets limits for eNaira transactions to be conducted by digital currency users with banks and merchants.
According to the CBN presentation obtained by The Nation, Tier 1 consumers with no existing bank account are to conduct daily transaction sending and receiving limit of N50,000 each and cumulative daily balance of N300,000.
For Tier 2 consumers with existing account, the CBN pegged daily transaction limit for sending and receiving at N200,000 each with N500,000 cumulative balance.
Also, for Tier 3 consumers with existing account, the apex bank pegged daily transaction limit for sending and receiving at N1 million each, and cumulative daily balance at N5 million.
For merchant, the CBN guideline allowed N1 million sending and receiving limit each, and placed no limit on amount they can sweep to their bank accounts. The regulator is however , still working out the eNaira transaction costs for digital currency users.
Emefiele, also listed the benefits of the Central Bank Digital Currency (CBDC) to include increased cross-border trade, accelerated financial inclusion, cheaper and faster remittance inflows, easier targeted social interventions, as well as improvements in monetary policy effectiveness, payment systems efficiency, and tax collection.
The CBN said it took the issue of security very seriously adding that the eNaira system will be treated as a National Critical Infrastructure even as the system will be subjected to comprehensive security checks prior to go-live.
Banks are expected to market and promote the adoption of eNaira as a digital version of cash to existing and potential customers in support of financial inclusion objective of the CBN.
According to the guidelines, Deposit Money Banks will be allowed to invite all their customers to register for the eNaira. With pre-generated codes, the banks can send invitation codes for on-boarding to a specific list of selected customers. On-boarding will be done for customers who have a code assigned by their banks. The banks have already validated and verified these customers.
The apex bank also specified the roles to be played by monetary authority, Central Bank, Financial Institutions, Government Agencies, businesses and merchants, banked and unbanked consumers as well as how the new currency would be designed and operated.
According to the CBN guidelines on report states that the eNaira is a legal tender for the entire country. The report also mentions that it will have non-interest-bearing CBDC status, a transaction limit for customers, and a value-based transaction limit.
Participants in the e-Naira programme are featured in five stages, including: Monetary Authority Suite; The Central Bank will be handing the first product component that includes issue, distribute, redeem and destroy the currency. Store data on a cloud server, monitor and analyse currency transactions.
Financial Institution Suite; licensed financial institution will be able to request currency or issue stable coins, manage digital currency across branches, Know Your Customer, identify and Anti-Money Laundering compliance capability.
In the eGovernment Suite; the government will be able to efficiently process digital payments sent to and received from citizens and businesses.
Merchants will provide low-cost payment and business management software, Point of Sale (PoS), remote payment solutions, online capabilities, transaction analysis and reconciliation.
Retail Consumer Suite features user-centred designs for a great user experience. The architecture will be expandable to enable innovation; features advanced privacy and security.
Consequently, the proposed transaction cost for the e-Naira wallet was also outlined by the CBN.
According to the apex bank, the digital currency infrastructure does not charge for user-to-merchant transactions and Peer-to-peer (P2P) exchange wallet transactions.
Project Giant, as the Nigerian CBDC pilot is known, has been a long and thorough process for the CBN, with the Bank’s decision to digitize the Naira in 2017, following extensive research and explorations.
Given the significant explosion in the use of digital payments and the rise in the digital economy, the CBN’s decision follows an unmistakable global trend in which over 85 percent of Central Banks are now considering adopting digital currencies in their countries.
In a statement, the CBN said its selection of Bitt Inc, from among highly competitive bidders, was hinged on the company’s technological competence, efficiency, platform security, interoperability, and implementation experience.
In choosing Bitt Inc, the CBN said it will rely on the company’s tested and proven digital currency experience, which is already in circulation in several Eastern Caribbean Countries. Bitt Inc. was key to the development and successful launch of the central bank digital currency (CBDC) pilot of the Eastern Caribbean Central Bank (ECCB) in April 2021.
Earlier on, CBN Director Information Technology, Rukiya Mohammed, said:
“The CBN is exploring the possibility of issuing digital currency. Nigeria cannot be left behind in the drive for digital currency. Over two years now, the CBN has been exploring the technology and made tremendous progress. In Nigeria, we have the notes and coins, so the CBN Digital Currency is meant to be a form of fiat money. It is going to complement the coins and notes that we have”.
Continuing, she said the CBN digital currency is just as good as having cash in one’s pocket adding that before the end of the year, the CBN will be making announcement on the pilot scheme.
