Check ENaira Risks,  IMF Asks Central Bank Of Nigeria

The International Monetary Fund’s ‘Nigeria Staff Report for the 2021 Article IV Consultation has disclosed the potential expansion of the use of the eNaira to cross-border fund transfers and agency bank networks could lead to new money-laundering and terrorism financing risks.

According to the report, with the launch of eNaira on October 25, Nigeria became one of the first countries in the world to introduce a Central Bank Digital Currency (CBDC) that is open to the public.

Despite the benefits, such as promoting financial inclusion, there are also some risks around the eNaira, which the Central Bank of Nigeria needs to address.

The IMF welcomed the gradual rollout of the CBDC and highlighted the need for vigilance to various risks, including monetary policy implementation, bank funding, cyber security, operational resilience, and financial integrity and stability, through regular risk assessment and contingency planning.

The IMF said, “Prospective expansion of eNaira use to cross-border fund transfers and agency bank networks may cause new money-laundering/financing of terrorism risks.”

However, the IMF has said that the CBDC is exposed to cyber security risks, unforeseen legal issues and financial integrity risks.

The IMF suggested a way out stating, “There are financial integrity risks which are mitigated by using a tiered identity verification system and applying more stringent controls to relatively less verified users.”

The Washington-based lender stressed the need for attentiveness to the different risks, urging the CBN to fix existing deficiencies in anti-money laundering laws and combat terrorism financing.