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Nigeria’s ambitious plan to establish the eNaira as a mainstream digital currency has encountered significant challenges in achieving widespread adoption. From the unbanked to the banked population, Nigerians are showing limited interest in embracing the country’s blockchain-based currency.
Playfully, my colleague teased me with the phrase “I’ll pay you with eNaira” when discussing a loan repayment. However, the reality is that there are few opportunities to actually spend eNaira. Most merchants in Nigeria do not accept the digital currency, and even tech-savvy individuals remain skeptical about its potential for widespread adoption. Despite the Central Bank of Nigeria’s (CBN) investments, the eNaira, Africa’s first central bank digital currency (CBDC), has failed to gain significant traction. Tobi Aremotobi, a digital finance expert based in Lagos, refers to the venture as “an exercise in futility.”
Launched in October 2021, the eNaira became the world’s second publicly available CBDC after the Bahamas’ Sand Dollar project. However, nearly two years later, the digital currency continues to struggle with adoption. According to a recent IMF report, the average number of weekly eNaira transactions stands at a mere 14,000, representing only 1.5% of the total number of wallets. These statistics reveal a disappointingly low level of adoption, with 98.5% of wallets remaining unused on any given week.
One of the main criticisms from Nigerians is that the eNaira lacks a compelling use case. Despite the CBN’s master plan, which emphasizes low transfer fees as a driver for adoption, Nigerians prioritize the form of money rather than its cost efficiency. Money can be in the form of cash or digital currency, and when it comes to digital currency, Nigerians are more inclined towards either centralized fiat or decentralized cryptocurrencies. The eNaira, being a CBDC, doesn’t fit into either category, leading to hesitation among potential users.
Aremotobi articulates this sentiment by questioning the need for another digital means of storing money that diminishes certain banking benefits. He states, “If the eNaira remains solely a means of transferring value or paying bills online, it will have to compete with the numerous options already available to me.” This viewpoint aligns with the argument familiar to crypto evangelists: a monetary asset must offer compelling use cases beyond being a store of value.
The CBN’s motivation for introducing the eNaira revolves around three objectives: increasing financial inclusion, reducing informality, and tapping into Nigeria’s growing remittance market. While the remittance aspect is still a work in progress, the CBN has placed significant emphasis on eNaira-powered financial inclusion. However, tangible progress in this area remains limited.
The IMF report suggests that the eNaira could potentially bring greater transparency to informal payments within Nigeria’s large informal economy. The goal is for the eNaira to penetrate the informal market while facilitating nationwide financial inclusion. To achieve this, the CBN can choose between leveraging existing mobile money networks to onboard CBDC users or constructing a dedicated retail access network. The former option would require users to route funds through their mobile money accounts to their eNaira wallets, incurring additional service costs. While this approach mitigates risk for mobile money balances, it fails to align with prevalent consumer trends in Nigeria’s mobile money market, where cash-in and cash-out transactions dominate.
The CBN has implemented various initiatives to promote eNaira adoption, such as USSD-powered eNaira operations and account tiers for the unbanked. Additionally, thousands of CBN staff members receive stipends directly into their eNaira wallets as an incentive for adoption. The apex bank claims to have encouraged major supermarkets like Shoprite, Spar, and Addide to adopt eNaira payments, but nationwide adoption by these prominent names is yet to materialize. While the CBN’s efforts are commendable from a financial inclusion perspective, the struggle with adoption suggests that the strategy requires further refinement.
Nosa Oyegun, who leads the product team at Kuda, describes the eNaira’s mission to capture the informal market as an uphill battle. He believes that the initial rollout of the eNaira lacked a clear strategy, emphasizing that a USSD-driven approach might have been more effective.
One significant hurdle the CBN and the eNaira face is a trust deficit. Actions such as the ban on cryptocurrencies, closure of crypto-linked bank accounts, forex manipulations, and the recent naira redesign have left many Nigerians with a negative impression of the apex bank and its policies. Tech and blockchain enthusiasts, particularly those affected by the crypto crackdown, are reluctant to embrace a CBN-controlled blockchain currency, fearing potential loss of funds. Building trust is crucial for successful banking, as it relies on the trust between banks and savers. Unfortunately, the eNaira’s limited adoption reflects the challenges it faces in gaining widespread trust.
The road to eNaira adoption is proving to be complex, requiring a reassessment of its value proposition, consideration of Nigeria’s mobile money landscape, and rebuilding trust in the CBN. While the eNaira possesses key elements for success, including government backing, there is still work to be done to unlock its full potential.
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