Nigeria’s eNaira has very few takers a year after its launch

A Bloomberg report shows that eNaira is not as popular as it was touted to be.
Cryptocurrency adoption is not the problem.
CBN is struggling to drive adoption.

According to a Bloomberg report, less than 0.5% of Nigerians (Nigeria’s total population = 217 million) have used the eNaira – the Central Bank Digital Currency launched last year by the Central Bank of Nigeria (CBN).

What went wrong

As per the report, the population faced a lack of clarity from the authority. Essentially, Nigerians prefer crypto to a state regulated CBDC. CBN cracked down on crypto trade in 2021. Crypto is seen as a viable alternative to central bank issued currency.

Meanwhile, the Nigerian economy is struggling with inflation and a weakening currency. The national currency Naira has been devalued multiple (almost 6) times since 2015. Inflation rate has reached a 17-year high at 20.77% in September. Prices of essential items like bread and gas are rising rapidly.

“The eNaira does not address any of these basic use cases, so no surprise at its low adoption rates so far,” said Adesoji Solanke of Renaissance Capital, a Lagos headquartered investment bank.

While the Nigerian authorities may be struggling with their CBDC, the population in general is visibly interested in crypto. As per Chainalysis, Nigeria ranks first in crypto adoption among African countries and 11th in the world; according to Kucoin, a crypto exchange, 35% of Nigerians in the age group of 18 to 60 used crypto this year.

Why did Nigeria adopt a CBDC in the first place

Like most other countries that are either adopting or testing CBDCs Nigeria too wanted to be an early entrant into the digital economy. At the 2022 eNaira hackathon held in Abuja this August the CBN governor Godwin Emefiele emphasized the significance of going digital: “We don’t have a choice but to live with the fact that we are now in a digital economy, in a digital space, where the user[s] of cash will dissipate almost to zero.”

During the eNaira Hackathon, the Emefiele said that the second phase had a target of 8 million active users and aimed to serve those who did not have bank accounts. He added that by August, eNaira had been used in 200,000 transactions (4 billion Nairas or $9.5 trillion)

What’s the deal with CBDCs

To counter cryptocurrency is the main reason countries are introducing CBDCs. Crypto transactions offer anonymity and effectively make it impossible to manipulate the public ledger – it is perceived as a security threat by authorities. Other reasons – increased efficiency, reduced currency management costs – are true but not as important because most countries already have the infrastructure to enable online transactions.

Several countries are either adopting CBDCs or are in the process of testing digital versions of their currencies. The Bahamas became the first country to fully adopt a CBDC (Sand Dollar). 11 countries including Nigeria have functional CBDCs. China is the only large economy which has a functional CBDC. Presently, China is looking to expand CBDC use to all provinces.