IMF Warns CBN eNaira is not good enough for Cross-Border Transactions, Lists Work that Needs to be Done First

IMF Warns CBN eNaira is not good enough for Cross-Border Transactions, Lists Work that Needs to be Done First

  • The use of eNaira has come under the spotlight of the International Monetary Fund again and this time with a money laundering, terrorism financing warning
  • The eNaira was launched on October 25, 2021, making Nigeria among the first countries in the world to introduce a Central Bank Digital Currency open to the public
  • Due to risk associated with eNaira IMF is warning that the CBN should not allow cross-border transactions with the digital currency

According to the International Monetary Cash, the possible expansion of eNaira usage to cross-border fund transfers and agency bank networks may create additional money-laundering and terrorism financing risks.

The IMF disclosed this in its ‘Nigeria Staff Report for the 2021 Article IV Consultation’ report.

According to the Punch newspaper IMF noted that although there are some benefits, such as promoting financial inclusion, there are also some risks around the eNaira, which the Central Bank of Nigeria needs to address.

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IMF warns CBN not to allow eNaira use outside Nigeria, may fuel money-laundering, terrorism financing
Kristalina Georgieva, Managing Director of the International Monetary Fund (IMF). Credit: IMF
Source: Getty Images

IMF said:

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

It also added that CBDC is exposed to cyber security risk, unforeseen legal issues and financial integrity risks.

Other parts of the report added:

“There are cyber security risks associated with the eNaira. Unforeseen legal issues, including for private law aspects of its operations (e.g., the exact nature of legal relationship between the wallet providers and CBDC holders), may subject eNaira to litigation and operational risks.
“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.”
“Staff noted significant financial integrity risks that could arise from wide accessibility of eNaira and stressed the need to fix existing deficiencies in the AML/CFT framework which could exacerbate these risks."

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IMF however welcomed the preventive measures and the planned AML/CFT regulations for eNaira intermediaries but warned again that money laundering/terrorist financing risk assessment of domestic and cross-border uses of eNaira and the adoption and implementation of the regulation along with putting in place risk-sensitive mitigation measures should be a priority,.

CBN asks Nigerians to Trust eNaira

Meanwhile, reported the Central Bank of Nigeria (CBN) has urged all Nigerians to use the eNaria, claiming it is more secure than cryptocurrencies.

This was disclosed by CBN spokesman, Nnamdi Okwuosa at the CBN Fair, with the theme, ‘Promoting financial stability and economic development.’

Explaining the benefits of eNaira, CBN said it is more reliable if Nigerians want a digital currency for online transactions.


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