Nigeria’s efforts to establish the eNaira as a mainstream digital currency have faced significant hurdles, with minimal adoption and a lack of trust from users. Despite the Central Bank of Nigeria’s (CBN) push, the eNaira, Africa’s first central bank digital currency (CBDC), has failed to gain traction and is viewed by many as an exercise in futility.
Launched in October 2021, the eNaira became the world’s second public CBDC after the Bahamas’ Sand Dollar project. However, nearing its second anniversary, the digital currency still struggles to gain widespread adoption. An International Monetary Fund (IMF) report revealed that the average number of eNaira transactions per week is just 14,000, representing a mere 1.5% of total wallets. This disappointing adoption rate reflects the challenges faced by the eNaira.
Users have expressed concerns about the lack of compelling use cases for the eNaira. The CBN hoped that low transfer fees would drive adoption, particularly among the youth demographic. However, users prioritize the form of money transfer rather than cost, and the eNaira falls into an unfamiliar category, being neither centralized cash nor decentralized cryptocurrency.
Tobi Aremotobi, a digital finance expert, questions the need for another digital means of storing money that takes away certain banking perks. The eNaira’s limited use as a transfer method or online payment option has failed to provide sufficient incentives for adoption.
The CBN’s motivations for the eNaira include increasing financial inclusion and reducing informality. However, progress in these areas has been slow. The eNaira’s potential to penetrate the informal market and drive financial inclusion hinges on leveraging established mobile money networks. Yet, Nigeria’s mobile money market differs from other countries, with a primary focus on cash-in and cash-out transactions rather than balance holding and digital payments.
Despite initiatives such as USSD-powered eNaira operations and account tiers for the unbanked, the eNaira has struggled to gain widespread acceptance. Major supermarket chains, like Shoprite and Spar, have yet to adopt eNaira payments on a nationwide scale. The CBN’s efforts, while commendable, have not translated into significant adoption rates.
Trust is a critical factor in the success of any digital currency. The CBN has faced a trust deficit due to actions such as the ban on cryptocurrencies, closure of crypto-linked bank accounts, forex manipulations, and recent currency redesigns. This lack of trust has contributed to skepticism and limited adoption of the eNaira.
Addressing these trust concerns and reassessing the strategy are essential for the eNaira’s success. Without building trust and reevaluating the approach, the eNaira will continue to face challenges in gaining broader adoption and acceptance.
