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Home Markets Currencies

The CBN must fix eNaira’s image problem

Olumide Adesina by Olumide Adesina
December 9, 2022
in Currencies, Opinions
CBN says eNaira will help Nigeria tackle financial crimes if embraced
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The Central Bank of Nigeria‘s digital currency, the eNaira, which was introduced a year ago as the first digital currency in Africa, has not received the positive response anticipated from its Crypto-savvy populace. 

The development of blockchain has contributed to the evolution of the idea of money and the monetary system. Additionally, it is undeniable that more people seem to be accepting digital currencies as a form of payment. 

However, it is estimated that less than 0.5% of Nigerians use eNaira, despite more than 10% of the Nigerian population being exposed to crypto assets. Based on Chainalysis data, Africa’s most populous country has regained the top spot as the leading crypto adopter, surpassing Kenya.  

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To protect themselves against the country’s unending currency decline, 33.4 million Nigerians, or 35% of the adult population aged between 18 and 60, owned or traded cryptocurrencies, according to a report by digital asset exchange Kucoin. 

Nigerians have been drawn to digital assets like stablecoins and Bitcoin as a hedge against fiat inflation and wealth preservation. But the eNaira is seen as a proxy for the problems affecting the continent’s largest economy and a sign of mistrust in the political establishment. 

The outcomes of the eNaira have thus far been underwhelming. Although the Nigerian CBDC may be stored in digital wallets and uses distributed ledger technology similar to that of Bitcoin or Ethereum, the enthusiasm of Nigerians for digital assets does not extend to the CBN product.  

The advent of thousands of digital assets, which are upending established payment methods and forcing central bankers to innovate to compete, gave rise to central bank digital money. The goal is to make payments cheaper, safer, and more dependable while providing governments with weak financial systems with an alternative. 

Nigeria is one of eleven nations— the other ten are in the Caribbean— that have completely implemented a central bank digital currency, according to the Atlantic Council’s CBDC tracker. 

Crypto-savvy people’s animosity toward the eNaira is partially attributable to the Central Bank of Nigeria’s February 2021 decision to forbid banks from providing services to cryptocurrency exchanges to cut off the fiat on and off ramps. 

Many young Nigerians worry that the government may monitor all of their transactions. This might give up a lot of information about people, leaving them open to harmful usage for political or commercial ends. 

As a result, the central bank is finding it difficult to educate a populace that typically distrusts the government and the ruling class. 

Some young Nigerians contend that the eNaira is an unattractive exploit because many Nigerians are unaware of the differences between the digital representation of cash deposits in bank accounts and the eNaira in digital wallets due to a lack of awareness and limited knowledge of digital currency operations. 

The Nigerian currency has also lost value around six times since 2015, and economists predict a further 20% loss in value next year as the economy is further hampered by soaring inflation. As a result, many of the nation’s residents may find it difficult to support the creation of a CBDC. 

Residents have turned to Bitcoin, altcoins, and stablecoins as a result of the central bank’s rationing of foreign exchange on the official market due to a lack of dollars. 

Fundamentally, the eNaira itself doesn’t solve public concerns about the nation’s currency’s fragility. As a result, given their (false) reputation for constant appreciation, investment in goods like Ethereum or Bitcoin still has a lot of appeal. 

Many Nigerians are confused by the central bank’s concentration on cryptocurrencies because they cannot distinguish between the government-backed eNaira and them. 

The eNaira app, which can be downloaded from both the Apple App Store and the Google Play Store, is said to be glitchy and frequently gets negative customer feedback. 

The eNaira also has to contend with strong opposition from other, less accountable digital currencies. 

Because of the weak Naira and the ease with which it can be transferred in and out of the nation, cryptocurrency has seen a sharp increase in popularity throughout Nigeria amid a widespread lack of trust in the government’s economic strategy. The eNaira is consequently almost irrelevant for customers dabbling in Ethereum and Bitcoin. 

The eNaira is still having trouble right now, especially in the poorest areas it is trying to reach. 

eNaira’s adoption might increase if new features were added, such as its application in public financing. Such opinion is shared by Central Bank Deputy Governor Obiora, who asserts that it might be a “game changer” if half of the government wages were paid in eNaira. 

Still, the CBN should be commended for volunteering for this social experiment, although it did a poor job of promoting its creation to the Nigerian people. This is partially attributable to the Apex Bank Central Banks’ inexperience in conducting business directly with the general population. Commercial banks will need to be more aggressive in their client outreach for the Enaira. By condemning commercial banks who might not want their consumers to move money to their eNaira wallets because doing so would not be in their best interests, the CBN governor made light of the limited adoption of eNaira. 

However, some banks worry that the CBN is promoting the eNaira against their applications despite sharing the same philosophy as their regulator. 

Additionally, the CBN needs to do a better job of making the digital currency relevant to people who receive remittances. Following an 8.1% fall the year before, the World Bank stated that remittance inflows to Sub-Saharan Africa increased by 14.1% to $49 billion in 2021. Strong economic activity in Europe and the US helped to fuel the growth in remittances.  

Nigeria, the largest receiving nation in the area, saw an increase in recorded inflows of 11.2%, which can be attributed in part to regulations designed to direct inflows through the banking system. 

The apex bank has recently stated that the re-designing of the naira would contribute to a cashless economy, as it would be accompanied by more e-Naira being minted. 

More needs to be done, even though Africa’s largest economy has dramatically curtailed the amount of cash that people and businesses can withdraw to advance its “cash-less Nigeria” policy and promote the usage of the eNaira. 

Through the use of the eNaira, the central bank can gain more knowledge about the speed of money and the effects of the money supply on the economy. Additionally, it will reveal illegal money flows, particularly those supporting terrorism. 

The CBN must also rethink its position on crypto assets rather than excluding them from the Nigerian banking ecosystem because their emergence, in general, will likely upend traditional banking, including the eNaira, seen as a government project to destroy the crypto market and build the trust lacking with the young Nigerian populace in ways policymakers never imagined. 


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Olumide Adesina

Olumide Adesina

Olumide Adesina is a financial market writer, analyst and investment trader. Message Olumide on Twitter @Olumidecapital

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