• Monday, May 27, 2024
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BusinessDay

Three years in, eNaira struggles as transactions crawl to N29bn

eNaira: Once upon an unloved CBDC

Nigerians have continued to ignore the eNaira, which has now been used for only N29.3 billion worth of transactions since its October 2021 launch.

Unveiled by former president Muhammadu Buhari as a tool to promote financial inclusion and reduce reliance on cash, the digital equivalent of the naira has recorded slow adoption.

For context, the value of electronic transactions in Nigeria was N611.06 trillion in 2023 and N237 trillion in the first quarter of 2024.

In its Nigeria ‘Staff Report for the 2024 Article IV Consultation,’ the International Monetary Fund noted that the adoption of the eNaira has been slow. So far, only 13 million eNaira wallets have been created, with most of them remaining inactive.

“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,” the Washington-based fund said.

Nigeria was the first African country to launch a Central Bank Digital Currency, and authorities hoped that it would reduce the use of cash and encourage digital payments, among others, it highlighted.

In its Article IV report on Thursday, the Fund noted that many potential users of the CBDC are worried about their data privacy. It, however, noted that Nigerian authorities aim to broaden the use of the eNaira, with the CBN recently acquiring the technological infrastructure to manage it.

The IMF stated, “Finally, an important challenge is how to make eNaira accessible to all the population while ensuring adequate financial integrity safeguards to prevent its use for financial crimes. eNaira is currently only accessible to those people with bank accounts.”

It noted that the CBN is currently piloting a program that enables people without a bank account to use eNaira via their smartphones, in a bid to boost adoption.

In May 2023, the IMF disclosed that 98.5 percent of eNaira wallets are inactive and the average value of transactions was 923 million naira per week.

It said, “As indicated by the levels of wallet downloads and transactions, the public adoption of the eNaira thus far has been disappointingly low.” It, however, argued (at the time) that it would be too early to judge the fate of the eNaira project.

Nigeria was the second country after the Bahamas to launch a CBDC, but questions regarding its use case have refused to go away.

As of August 2023, the volume of eNaira in circulation was N9.78 billion, according to the Central Bank of Nigeria. This rose to N13.98 billion by 2023’s end.

A source, speaking to BusinessDay about the eNaira’s fate, said, “It stood no chance with the banks that frustrated it because it did not give them room to make a profit… The banks felt it wasn’t fair that they would be used as a medium to push the adoption of eNaira and not make money from it.”

There have been renewed attempts by the CBN to save its digital currency. In March 2024, it was announced that the apex bank signed a Memorandum of Understanding with a blockchain firm to accelerate the adoption of the eNaira.

Despite this, there are indications that the fate of the eNaira may be sealed with the CBN working on a CBDC to be called cNGN. Unlike the eNaira which is managed by the CBN, the cNGN token will be created and managed by tier-one banks.