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2024

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In October 2021, Nigeria became the first African nation and the second country globally to launch a Central Bank Digital Currency (CBDC), the eNaira. The <a href="https://www.investopedia.com/terms/c/central-bank-digital-currency-cbdc.asp" target="_blank" rel="noopener">CBDC</a> is a digital currency that is issued by a country’s central bank. It is similar to cryptocurrencies, except that its value is fixed by the central bank and is equivalent to the country’s fiat currency. 
According to Nigeria’s apex bank, the main objective of the CBDC was to provide businesses and consumers with privacy, transferability, convenience, accessibility, and economic security. At that time, the most populous African country had lofty ambitions for the blockchain-based eNaira. 
But over 30 months after the grand announcement of the naira-backed token by the then Central Bank of Nigeria’s Governor, Godwin Emefiele, adoption and acceptability among the populace remains a challenge. Many industry analysts consider the project forgotten as nothing significant has been heard about it in over one year.&nbsp; 
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How has been the adoption of the eNaira? What challenges is it facing? What do blockchain stakeholders and ordinary citizens think about the project? What can be done to revive the project? 
We will discuss these and more in this article.&nbsp; 
<h5 id="adoption-of-the-enaira" class="wp-block-heading">Adoption of the eNaira&nbsp;</h5> 
Although, there is no publicly available data that details the adoption rate of the eNaira in real-time, the information available points to an abysmal reception in almost 3 years of existence.&nbsp; 
In a <a href="https://www.imf.org/en/Publications/WP/Issues/2023/05/16/Nigerias-eNaira-One-Year-After-533487" target="_blank" rel="noopener">report</a> in 2023, the International Monetary Fund (IMF) said only 0.5% of the Nigerian population used the eNaira within a year of its launch. It also reported that 98.5% of eNaira wallets were inactive one year after the launch. 
In what looks like a fair improvement last month, the IMF, in its Nigeria ‘Staff Report for the 2024 Article IV Consultation’ <a href="https://www.elibrary.imf.org/view/journals/002/2024/102/article-A001-en.xml" target="_blank" rel="noopener">stated</a> that the adoption of the eNaira has been slow. The Washington-based fund said only 13 million eNaira wallets have been created so far, with most of them remaining inactive. 
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Additionally, the IMF said that the CBDC has been used for only N29.3 billion worth of transactions since its October 2021 launch. “Since the eNaira’s launch, the volume of executed transactions has reached 854,512 transactions, mostly from consumers to merchants, with a total value of N29.3 billion”, it reported 
To put into perspective how uninspiring that is, the value of electronic transactions in Nigeria was N611.06 trillion in 2023 and N237 trillion in Q1 2024. 
No denying the fact that the CBN made attempts to save its digital currency in the past. The most recent one was an announcement of a Memorandum of Understanding with blockchain firm Gluwa in March 2024, to accelerate the adoption of the eNaira. 
<a href="https://nairametrics.com/2024/03/07/cbn-signs-mou-with-blockchain-firm-gluwa-to-boost-enaira-adoption/?amp=1" target="_blank" rel="noopener">Reports</a> indicated that the partnership would focus on using blockchain technology to improve eNaira functionality, drive financial inclusion, and create space for financial innovation.&nbsp; It was meant to make it easier for fintech lenders to process loans — origination, tracking, and settlement — by allowing direct eNaira transfers to customers. 
However, three months since that announcement, no substantial update has been heard about the project. The CBN and other financial agencies seem to be fixated on fighting crypto players alleged to be involved in the free fall of the local currency, the naira. 
Related post: <a href="https://technext24.com/2024/05/15/naira-kucoin-discontinue-p2p-trading/">KuCoin discontinues naira-based P2P trading as Nigeria clampdowns on crypto exchanges</a> 
Also, there are clear indications that the CBDC might have gone down the priority order of the CBN under the new Governor, Yemi Cardoso, as some reports suggest that the apex bank is working on another CBDC that will be called the cNGN. 
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 <img loading="lazy" decoding="async" width="650" height="350" src="https://technext24.com/wp-content/uploads/2024/05/Olayeni-Cardoso.jpeg" alt="0.5% Cybersecurity Levy: CBN directs banks to halt implementation" class="wp-image-231663">
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 Central Bank Governor, Olayemi Cardoso
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According to insider updates, unlike the eNaira which is being managed by the CBN, the cNGN token will be created and managed by tier-one banks. 
<h5 id="factors-that-stymied-the-growth-of-the-enaira" class="wp-block-heading">Factors that stymied the growth of the eNaira</h5> 
According to a top executive at a tier-one bank who spoke to Technext under the condition of anonymity, a lack of sufficient publicity is the chief reason for the poor adoption of the eNaira.&nbsp; 
“We have the eNaira platform linked to our banking platform but never for once has it been used. Most Nigerians still don’t know how it works – resistant to changes, they still prefer traditional means of debit and credit.” 
According to this executive, the young demographic could have easily made up for a largely financially illiterate population. Unfortunately, they cannot embrace the CBDC since there are blockchain products that serve the same purpose in a more trusted and verifiable way. 
The chairman of the Blockchain Industry Coordinating Committee of Nigeria (BICCoN) and Founder of SaBi Group, Lucky Uwakwe Arisukwu believes that the challenge lies at the door of traditional commercial banks. 
According to him, these banks make the conversion process from eNaira to fiat naira cumbersome. 
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 <img loading="lazy" decoding="async" src="https://technext24.com/wp-content/uploads/2024/06/Lucky-Uwakwe.jpeg" alt="Almost 3 years later, Nigeria’s digital currency, eNaira struggles for&nbsp;adoption" class="wp-image-232584" width="470" height="704">
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 Lucky Uwakwe
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For other key players, the country’s digital currency suffered because the CBN has not been on good terms with the already robust Nigerian crypto community. Otherwise, it could have leveraged the strength of the bourgeoning ecosystem to form an inclusive mass-adoption strategy for the digital token. 
<h5 id="going-forward-will-the-enaira-survive" class="wp-block-heading">Going forward, will the eNaira survive?</h5> 
Overall, there is hope for the eNaira. This is because it is generally believed that CBDCs will replace fiat tokens in the finance world soon. But, first, the major bottlenecks have to be eliminated. 
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 <img loading="lazy" decoding="async" width="1280" height="720" src="https://technext24.com/wp-content/uploads/2022/08/Nigeria-launches-eNaira.jpg" alt="Nigeria launches eNaira" class="wp-image-154570">
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 Former Nigeria President, Muhammadu Buhari and Former CBN Governor, Godwin Emefiele at the launch of the eNaira in 2022
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Lucky, for instance, suggests that stakeholders need to be made to see the eNaira as more than a tool for basic transactions. For this to work, he said, the commercial banks which are under the regulatory purview of the CBN have to be compelled to become major. stakeholders in the process. 
“When these bottlenecks are removed and commercial banks understand how the usage will not take business away from them or are mandated on how they can coexist without conflict of interest”, he added. 
The bank executive also believes that an accelerated adoption can still happen if the apex bank can earn the trust of the youth population.&nbsp;But, he believes that the journey is. yet to. start: 
“But the government hasn’t said anything about the digital currency since the last campaign. So, they are unserious. They are just solely after creating options to discourage others from using blockchain options. Is there hope? Maybe, but the large population of the country still prefers traditional banking”, he added.

Almost 3 years later, Nigeria’s digital currency, eNaira struggles for adoption

Technext.ng

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