eNaira fails to entice merchants, banks

eNaira, Africa’s foremost central bank digital currency (CBDC), is not getting the love it should deserve from Nigerians, including merchants and deposit money banks.

A chart from the Central Bank of Nigeria (CBN), exclusively obtained by BusinessDay, shows that while the eNaira mobile app has seen 764,000 downloads nearly eight months after its launch, only 416,280 are actively using the app.

347,720 of the downloads are inactive. In other words, the app is sitting on mobile devices but the owners are yet to carry out any activity or be onboarded. The CBN has been able to onboard 229,360 accounts, even then, only 168,380 of these accounts are active.

The app apathy appears to be more pronounced among merchants. Out of 168,380 people who have activated their wallets, only 80 are merchants. While the 80 merchants have also funded their wallets, the number of individuals that have funded their wallets is just 18,460, which means several active accounts may not be using the app to make payments but for other purposes.

Merchants who spoke to BusinessDay say the eNaira app is not popular among buyers, hence it is very rare to get requests for payment using the app.

“Majority of the transfers are done using bank apps, not eNaira. There are also channels like PoS, which the customers prefer. So the eNaira does not come into the discussion,” said a merchant.

Some experts say the eNaira’s low popularity among individuals could also be due to its inability to deliver on the promise of remittances.

However, sources close to the CBN said the apex bank is working in collaboration with SWIFT, the global provider of financial messaging services, to connect the eNaira to other CBDCs for ease of international payment transfer.

The plan is to develop a gateway to intercept, translate, and send eNaira to SWIFT for onward transmissions. For that to become reality and be effective, it requires many more countries to actually launch their CBDC, especially developed countries that control the major currencies used in global transactions.

While the International Monetary Fund counts about 100 countries actively evaluating CBDCs, only a few countries have so far launched. These include the Bahamas, Nigeria, and seven countries under the Eastern Caribbean Currency Union.

The countries in the Eastern Caribbean Union created their own form of digital currency meant to help speed transactions and serve people without bank accounts.

The seven countries involved are Antigua and Barbuda, Dominica, Grenada, Montserrat, St. Kitts, Nevis, Saint Lucia, and St. Vincent and the Grenadines.

In May, SWIFT confirmed that it has tapped Capgemini, the French information technology services and consulting firm, to look at tests to link various CBDC networks for cross-border transactions.

The partnership with Capgemini will help SWIFT focus on specific use cases, including “CBDC to CBDC, fiat to CBDC, and CBDC to fiat.”

Thomas Zschach, chief information officer of SWIFT, suggested that the test will not be effective without the working together of the CBDCs.

“Facilitating interoperability and interlinking between different CBDCs being developed around the world will be critical if we are to fully realise their potential. Today, the global CBDC ecosystem risks becoming fragmented with numerous central banks developing their own digital currencies based on different technologies, standards, and protocols,” said Zschach.

While the CBN is hoping to significantly make remittances cheaper, the possibility may take longer than expected. For one, countries such as China, which is one of the first to propagate the idea of a CBDC, have yet to fully launch their electronic yuan.

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Abimbola Omotola, assistant vice president at Chapel Hill Denham, said the eNaira can succeed if the CBN had made it open to consumers without a Bank Verification Number (BVN). The majority of Nigerians that are financially excluded do not have BVN. The number of bank accounts linked to BVN reached 52.1 million in January 2022. The figure shows that more than 59 million accounts remain unverified in Nigeria and millions more in Nigeria do not have bank accounts.

Omotola suggests that by opening the eNaira to those without bank accounts, the CBN will directly be financially including millions of Nigerians, thereby solving the problem that has lingered for many years and for which it has set a target of 95 percent by 2024.

Ignoring Nigerians without BVN will mean the addressable market for eNaira is only for Nigerians with BVN. This market already has its attention divided by the many digital banking innovations being provided by commercial banks, fintech companies, and recently telecom companies.

“The key challenge is that it has found very little usability; the unique selling point of that product is very weak. If you look at what the product is doing it is not doing what it is different from what other payment apps are doing,” said Omotola.

For banks, the issue with the eNaira is that it lacks a business case. Many bank sources say operators in the financial services industry want the CBN’s approval to layer their services on the eNaira technology, however, the apex bank’s total control of the eNaira entire process makes their request not feasible. In the absence of a viable business case, the majority of the banks are unable to push the publicity of the eNaira.

“If they won’t let banks layer their services on the eNaira technology, the CBN should pay banks to market the eNaira,” a bank source who would like to remain anonymous said.

There is also thinking among the banks that the eNaira is a competition as it is offering nearly all the services that banks have already solved through their digital banking channels.

“The banks and CBN are actually partners and to achieve the goal of financial inclusion both have to collaborate. It will be very important if so many people can have access to the technology,” Omotola said.