In a recent report by the International Monetary Fund (IMF), the adoption of the eNaira, Nigeria’s digital currency, has been assessed as disappointingly low.
The IMF report sheds light on the challenges faced by the eNaira project one year after its launch and emphasizes the need for additional measures to enhance its adoption.
Despite the absence of major risk factors, such as large-scale cybersecurity events, the IMF report acknowledges the Central Bank of Nigeria’s (CBN) success in maintaining uninterrupted 24/7 operations of the eNaira.
However, the report highlights the sluggish take-up of digital currency by both households and merchants.
Findings of the report
One of the key findings outlined in the report is the slow growth in eNaira wallet downloads among retail users. Although there was an initial surge in downloads, reaching 500,000 units within a short period, subsequent progress has been slower.
- As indicated by the levels of wallet downloads and transactions, the public adoption of the eNaira thus far has been disappointingly low.
It took an additional 63 days to reach 600,000 units and a further 143 days to reach 700,000 units. As of end-November 2021, the total number of retail eNaira wallets stood at approximately 860,000, which accounts for only 0.8% of Nigeria’s active bank accounts.
Comparatively, the number of merchants utilizing eNaira wallets amounted to approximately 100,000, just a fraction of the merchants employing traditional Point-of-Sales (POS) terminals for card payments.
The IMF report also reveals that the majority of eNaira wallets remain inactive, with only a limited window of heightened activity observed. On average, there have been around 14,000 eNaira transactions per week since the currency’s inception, representing a mere 1.5 percent of the total number of wallets.
This indicates that 98.5% of wallets have not been used at all during any given week. The average value per eNaira transaction has been approximately N923 million per week, which amounts to a mere 0.0018% of the average amount of M3 (broad money supply) during the same period. The average value per transaction stands at N60,000.
Still early to judge
While acknowledging the challenges faced by the eNaira project, the IMF report emphasizes that it is still too early to pass final judgment on its fate.
The phased approach taken by the CBN, initially granting access only to customers with bank accounts and restricting transactions to onshore use, has limited the tangible benefits of eNaira adoption for most wallet holders.
Moreover, eNaira faces tough competition from well-established incumbent networks, such as mobile money, which offer similar services with broader acceptance.
What CBN is doing to increase adoption
In response to the low adoption rates, the CBN has entered phase 2 of the eNaira project. This phase aims to broaden the coverage of the digital currency by including individuals without bank accounts but with mobile phones and valid Know Your Customer (KYC) information.
- Additionally, individuals without internet access can now access the eNaira through USSD technology.
- The CBN has also launched an intensified campaign to promote eNaira usage, encouraging major supermarkets and hotels to participate in the merchant network, incentivizing CBN staff with eNaira stipends, and hosting developer hackathons to discover and showcase potential eNaira use cases.
- The IMF report concludes by highlighting the importance of addressing the challenges faced by the eNaira project, including increasing public trust in Nigeria’s monetary system and improving the technological reliability of the digital currency.
The IMF report emphasizes that the success of the eNaira project depends on breaking the low adoption equilibrium by employing clever strategies and a bit of luck.
Additionally, the report underscores the significance of competing with well-established incumbent networks, such as mobile money, which already provide widely accepted retail-level services.
What the CBN is doing right
While the report acknowledges the challenges and calls for further action, it also recognizes that the CBN has taken steps to address the issues.
- The expansion of eNaira coverage to include individuals without bank accounts but with mobile phones and valid KYC information is a positive move.
- By allowing cash-in services through agency banking networks, mobile money transfers, and third-party transfers, the CBN aims to make it more accessible for individuals to open eNaira wallets and load their balances.
- The CBN’s intensified campaign to promote eNaira usage is another positive development. Encouraging major supermarkets and hotels to participate in the eNaira merchant network can increase acceptance and usage among consumers.
- Providing stipends to CBN staff through the eNaira demonstrates the CBN’s commitment to leading by example.
- Additionally, hosting developer hackathons can foster innovation and uncover new use cases for digital currency.
However, the report also highlights the challenges ahead. The expansion of eNaira usage for remittances may face obstacles in the near term, and the modalities of such usage are still under consideration.
Building public trust in Nigeria’s monetary system and addressing concerns regarding the eNaira’s technological reliability are crucial tasks that need to be tackled.
Download the free report here.