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eNaira fails to gain traction in first year of rollout – IMF

eNaira future uncertain after Emefiele ouster

The usage of eNaira, Nigeria’s digital currency, has been slow since the first year of its launch in 2021, according to the International Monetary Fund (IMF).

In its latest report, titled ‘Staff Report for the 2022 Article IV Consultation: Key Issues’ and ‘Nigeria: Selected Issues’, the international organisation said the uptake of eNaira in the first year has been slow with retail wallet downloads amounting to 942,000 at end-November 2022—0.8 percent of active bank accounts.

“The total number of eNaira retail transactions since the inception (around 802,000) is less than the number of eNaira wallets, which indicates that wallets are not actively used.

It said the adoption of eNaira by households and merchants has been rather slow. “After a strong initial uptake, wallet downloads have slowed, reaching 0.8 per cent of bank accounts, and merchant wallet downloads amount to about 10 percent of merchants with Point-of-Sale terminals,” it added.

A digital currency is a means of payment or money that exists in a purely electronic form.

It helps to promote and facilitate financial inclusion, enable direct welfare disbursements to citizens, facilitate diaspora remittances, reduce the cost of processing cash and improve the availability and usability of Central Bank money.

Others are to increase revenue and tax collection, support a resilient payment system and improve the efficiency of cross-border payments.

On October 25, 2021, Nigeria became the first African country to launch a Central Bank Digital Currency (CBDC), as a legal tender.

According to President Muhammed Buhari, a properly managed e-Naira could add more than $29 billion to Nigeria’s Gross Domestic Product over the next 10 years.

A 2022 Global CBDC Index by PwC ranked Nigeria, Bahamas, China, Jamaica, Eastern Caribbean, Ukraine, Uruguay, Thailand, Sweden and the Republic of Korea as the top 10 countries leading the race in digital currency.

Andrew Nevin, the chief economist at PwC Nigeria said CBDCs will transform the payment system, as low value-added transactions become possible in a costless and secure way for everyone.

“The success could also catalyse more complex and transformative CBDC uses, including blockchain identity management, land registry, and supply chain verification.

“As each of the use cases develops, we can bring more people into the economic and financial system and lift tens of millions out of poverty,” he said.

Apart from Nigeria, other Sub-Saharan African countries are exploring the use of digital currencies to enhance payment systems.

According to the IMF, South Africa and Ghana are in the pilot phase of a digital currency, while Uganda, Kenya, Rwanda, Mauritius, Madagascar, Zimbabwe, Eswatini, Namibia and Zambia are researching its process.

CBDCs can improve financial inclusion through programmability, said Bo Li, deputy managing director of IMF said

“It can allow government agencies and private sector players to program and create smart contracts to allow targeted policy functions such as welfare payments, food stamps, and consumption coupons,” he said.

Li added that by programming CBDCs that money can precisely target from what kind of money people can own to what kind of use the money can be utilized for food.

After one year of launching the eNaira, Godwin Emefiele, governor of the CBN revealed that the country has issued N2.1 billion to financial institutions, three Billion naira has been successfully minted by the bank, about one million customers have been on-boarded on the e-Naira platform and 33 banks have fully integrated and live on the platform.

Read also: Naira falls to N462 on liquidity

And that over 3,305 merchants have successfully registered on the platform across the country including Shoprite, Sahad Stores, A.A. Rano fuelling stations, Fraser Suites, and November Cubes, among others, over 700,000 transactions amounting to about eight billion naira have been recorded on the platform and over 2.5 million daily visits to the eNaira website.

“We celebrate the successes achieved so far by the CBN and all Nigerians, it must be acknowledged that the journey is iterative and today is just another step and not the destination,” he said.

Emefiele added that the team continues to work fastidiously to bring enhanced features and improved user experience to the eNaira. “To this end, the coverage of collaboration was enlarged in a bid to further drive adoption.”

The IMF report recommends that while a public usage promotion campaign is making inroads, a well-designed public adoption strategy will need to address the following issues.

“A well-designed public and private partnership is required to ensure proper safeguard of e-money/mobile money, considering that the private financial sector’s contributions to financial inclusion could be negatively affected depending on the design of eNaira’s use for financial inclusion.

“The complementarity of mobile money and eNaira is also relevant for the delivery of social assistance,” the report said.

It added that the last mile fiscal agent that delivers cash assistance to villagers may be empowered to on-board the beneficiary to both mobile money and eNaira after quick Know Your Customer checks, with appropriate risk-sensitive financial integrity safeguards.