Money

Use of enaira will reduce bank account deposits, says IMF

Published

1 year ago

November 17, 2021

The International Monetary Fund (IMF) says one of the risks associated with the introduction eNaira is that it will reduce deposits into bank accounts.

Jack Ree, an Economist in the IMF African Department, also observed that there is need to manage cybersecurity and operational risks associated with the eNaira, just like other digital technologies.

“Like digital currencies elsewhere, the eNaira carries risks for monetary policy implementation, cyber security, operational resilience, and financial integrity and stability. For example, eNaira wallets may be perceived, or even effectively function, as a deposit at the central bank, which may reduce demand for deposits in commercial banks,” Ree said.

To mitigate the risks, he noted that the Central Bank of Nigeria (CBN) has subjected transfer of funds from bank deposits to eNaira wallets to daily transactions and balance limits.

He said, “Financial integrity risks, such as those arising from the potential use of the eNaira for monetary laundering, are mitigated by using a tiered identity verification system and applying more stringent controls to relatively less verified users.

“For example, for now only people with a bank verification number can open a wallet, but over time coverage will be expanded to people with registered SIM cards and to those with mobile phones but no ID numbers.

“Even so, wallet holders who meet the highest identity verification standards cannot hold more than N5 million (about $12,200) each in their eNaira wallets. To address cybersecurity risk, regular IT security assessments are expected to be conducted.”