Nigeria: eNaira adoption in Nigeria still poor, says IMF

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The International Monetary Fund (IMF) has expressed disappointment over the rather slow adoption of Nigeria’s digital currency, eNaira, stressing that it leaves nothing to cheer about.

In a report titled, “Nigeria’s eNaira, One Year After,” dated May 2023 and obtained by The Nation at the weekend, the IMF said the phased approach chosen by the Central Bank of Nigeria (CBN) is to blame and its inability to force usage.

According to the IMF, downloads have been slow since the eNaira recorded 500,000 downloads when it launched one year ago.

After reaching 500,000 downloads, it took 63 days to record 100,000 downloads. After an additional 143 days, the eNaira peaked at 700,000, but as of the end of November 2021, only 860,000 retail wallet downloads had been recorded, while merchant wallets are only 100,000 downloads.

This is just 0.8 per cent of Nigeria’s active bank accounts, indicating slow progress in the Central Bank Digital Currency (CBDC) initiative, considering only 14,000 eNaira transactions per week have been recorded since the digital currency was launched in October 2021.

“As indicated by the levels of wallet downloads and transactions, the public adoption of the eNaira thus far has been disappointingly low. However, it would be still too early to judge the fate of the eNaira project,” IMF said in the report.

The report further reads: “First, the slowness in eNaira take-up is not an unexpected outcome given CBN’s choice of a ‘phased approach’— initially granting access only to customers with bank accounts and restricting eNaira transactions to onshore uses only.

“Thus, the eNaira has, until recently, not presented tangible benefits to most of its wallet holders—given limited acceptance (e.g., low level of adoption by merchants and other retail customers) and availability (for these customers) of alternative means of payment (e.g., debit card, mobile banking apps)—which are more readily accepted.

“In fact, the total number of eNaira transactions since the inception (around 802,000) is less than the number of eNaira wallets—implying that bulk of the current wallet holders have not used their wallets more than once after opening their wallets.

“Second, even though the eNaira is a legal tender—its universal acceptance cannot be imposed on the public. And this makes the eNaira a network externality product—whose value increases with the size of the network.

“Like any network products with similar traits (e.g., credit card), breaking the initial low adoption equilibrium requires a mix of clever strategies and luck. eNaira would also need to compete with the far-more established incumbent networks (e.g., mobile money)—which provides broadly the same service at the retail level. Weakness in public’s trust on Nigeria’s monetary system and the eNaira’s technological reliability is another important barrier that needs to be tackled.”

At the centre of the slow adoption of the eNaira is the issue of poor infrastructure such that one year after the launch of the eNaira, less than 0.5% of Nigerians were using it. In June 2021, Nigeria announced it may be kicking off a CBDC pilot program before the end of that year, and a Central Bank of Nigeria official said the institution had been researching a digital currency for two years. Just four months later, the eNaira went live.

Estimates show the number of Nigerians with a smartphone may be anywhere between 25 and 40 million. Africa’s most populous nation, Nigeria is home to more than 219 million, with nearly half over the age of 18 and old enough to have a phone.

There have been some attempts at expanding infrastructure digital payments with the eNaira. In September 2022, popular African payments platform Flutterwave added the currency as a payment option for merchants.

The CBN had also tinkered with the idea of working with new tech partners to build out a new system to support the eNaira.

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