Today, the eNaira continues to face many challenges from the nation’s monetary policy and financial stability.
The Central Bank of Nigeria (CBN) has announced an amendment to its digital currency model. While it did not offer any further details, the CBN noted that the new model will increase the adoption of the eNaira. It also anticipates an increase in the wallet activity of existing holders.
From Conception to Remodelling: eNaira Story
The eNaira is one of the many CBDC initiatives that are being developed around the world. CBN began its research and exploration into the use of CBDC in the country in 2017. In 2021, it revealed its partnership with Bitt to facilitate the rollout of the digital currency. Nigeria became the first African country to roll out its CBDC when it launched the asset in October of 2021.
According to former President Buhari, the digital currency was expected to “foster economic growth and boost the GDP of Nigeria by $29bn over the next 10 years”. The asset was also to boost financial inclusion, facilitate cross-border payments, and support the development of the nation’s digital economy.
Since the eNaira launch, the Apex bank has made several moves to improve the asset’s outlook and improve adoption. In February, the bank began seeking new technology partners. It was also in talks with New York-based technology firm R3 on a new model. Earlier in July, CBN also upgraded its eNaira app to enable contactless payments using NFC chips.
Not Enough Traction
Despite launching in 2021, the eNaira has struggled to gain traction. That was until February when it saw a 63% increase in transactions following the cash crunch in the nation. There was also a 12-fold increase in the number of e-wallets, with the amount increasing to 13 million e-wallets.
Compared to over 200 million estimated Nigerian citizens, 13 million users barely scratches the surface. Clearly, the eNaira continues to face many challenges from the nation’s monetary policy and financial stability. Users also have to deal with the legal and regulatory framework for CBDCs, the cybersecurity and privacy issues, and the competition with other digital currencies. Again, the country has a $220 billion informal economy that uses cash for its transactions.
If the eNaira is to succeed, the new model must factor in the uniqueness of the Nigerian space and incorporate it into its design.
Global CBDC Outlook
Meanwhile, in other nations, the research and exploration into CBDCs continue. China leads that race with its digital yuan and recently began testing its use in the aviation sector. Australia, Thailand, and Russia are in various phases of pilot-testing their currency. Also, the European Central Bank is on track to begin its pilot for the digital euro. India and Brazil plan to launch a CBDC by 2024.