How the CBN can leverage the IMF’s REDI Framework to boost eNaira adoption

Nigeria launched its central bank digital currency (CBDC), the eNaira, in 2021. However, the eNaira’s adoption remains slow since its launch. The International Monetary Fund (IMF) noted in its paper that the eNaira’s slow adoption is partly because of the Central Bank of Nigeria (CBN)’s “phased approach.” The phased approach means the CBN initially restricted the eNaira to bank account holders and also limited the eNaira to domestic transactions only. Notably, the CBN hurriedly executed the eNaira project. While Nigeria surprisingly became the first country worldwide to launch a CBDC, it did not plan adequately for its adoption. Consequently, the eNaira has failed to achieve its financial inclusion goals for Nigeria’s unbanked (citizens who do not use banking or financial services) and the underbanked (citizens in areas with insufficient banks to serve the population’s demand), enhancing the local payment system, and facilitating international payments. The CBN should adopt the IMF’s proposed framework for CBDC adoption by considering regulatory review, education initiatives, and incentives to boost the eNaira’s adoption.

The IMF published a paper in September 2024 proposing a framework for CBDC adoption. The paper found that CBDC adoption remains slow in countries that have launched them or are at the pilot stages of CBDC projects, due to challenges like low public awareness and insufficient incentives. The IMF advised central banks to consider technical readiness and design choices that target citizens’ participation early in CBDC projects to achieve successful adoption. The proposed framework, entitled “REDI” (Regulatory strategies, Education initiatives, Design/deployment choices, Incentive mechanisms), outlines measures to inform stakeholders about CBDCs and suggests incentives that central banks may offer users to encourage active participation.

Financial incentives can motivate existing users, attract potential ones, and revive eNaira adoption. The IMF paper discloses that 98 percent of users have dumped their eNaira wallets, suggesting they have lost interest or do not find it useful. The CBN should consider incentivising users and intermediaries such as commercial banks for eNaira transactions. For example, in addition to the cost-free transfers, the CBN may offer banks and customers a 0.005 percent bonus on every eNaira transaction.

The CBN can use eNaira to achieve financial inclusion for Nigeria’s unbanked and underbanked. eNaira allows users to create and maintain wallets without bank accounts. Approving it for international transactions will also enable citizens to send funds to other countries and make payments using local currency. This approval will eliminate the charges of converting the Naira to foreign currencies before making international payments and will motivate citizens to use the eNaira.

The CBN should consult with local stakeholders, such as the ever-growing Nigerian cryptocurrency community, to ensure the eNaira’s broader adoption. The consultation could include engaging an organisation like the Stakeholders in Blockchain Technology of Nigeria (SiBAN) on research and education initiatives. Research could focus on sourcing information about users’ interests and trends regarding digital currencies applicable to the eNaira. Experts in SiBAN can also educate the CBN on how to drive citizens’ engagement with the eNaira to boost its adoption.