Central banks worldwide are accelerating efforts to launch digital currencies as part of a broader strategy to modernize financial systems, enhance payment efficiency, and drive financial inclusion.
Nations like the Bahamas, Nigeria, and Jamaica have successfully launched their Central Bank Digital Currencies (CBDCs), albeit with varying levels of adoption and success.
According to the Atlantic Council, a US-based think tank, a CBDC is virtual money issued and backed by a central bank.
As of today, 134 countries and currency unions, representing 98% of global GDP, are exploring CBDCs, a sharp increase from just 35 countries in May 2020. Currently, 66 countries are in advanced stages of development, pilot testing, or have already launched their digital currencies.
Nigeria was the first country in Africa to introduce a CBDC, launching the eNaira in October 2021.
The digital currency, which is pegged to the Nigerian naira, was unveiled by former President Muhammadu Buhari. Its primary aim was to drive financial inclusion by integrating unbanked populations into the country’s financial system.
The Central Bank of Nigeria (CBN) highlighted several benefits of the eNaira, including reducing the cost of printing currency, creating a fast and reliable payment system, supporting the digital economy, simplifying cross-border payments, and improving economic activities.
The eNaira was also intended to enhance the effectiveness of monetary policies, facilitate targeted social interventions, and streamline tax remittance and collection, all geared toward supporting Nigeria’s economic growth.
A Centralized Alternative To Cryptocurrencies
The eNaira was introduced as part of the CBN’s strategy to curb the use of cryptocurrencies, which were perceived as volatile and anonymous. Unlike cryptocurrencies, the eNaira operates within a centralized system, enabling the CBN to monitor transactions, control wallet access, and regulate the purchasing power of holders.
In the weeks following its launch, the eNaira app saw significant downloads, with over 589,000 downloads across iOS and Android stores by November 2021.
The app averaged 20,000 downloads per day, and by January 2022, it had surpassed 694,000 downloads and processed over 35,000 transactions. The CBN also reported that the platform had processed transactions worth just under $10 million later that year.
Despite the early enthusiasm, adoption rates of the eNaira have remained disappointingly low. An IMF report from July 2023 revealed that only 0.5% of Nigerians had adopted the eNaira, with 98.5% of wallets remaining inactive a year after its launch.
More than three years later, the adoption rate continues to lag, and the public’s perception of the digital currency has been largely negative.
The IMF described the public adoption of the eNaira as “disappointingly low.” On social media, users have mocked the initiative with terms like “E-vanish,” “E-vaporate,” and “E-Dead,” suggesting that the currency has failed to gain momentum.
Further complicating matters, the eNaira mobile app, designed for easy access to the digital currency, was removed from the Google Play Store, although it remains available on the Apple Store.
Additionally, the USSD code (*997#), intended to facilitate transactions for users without smartphones, has proven non-functional. The eNaira’s official social media accounts have been largely inactive, with the last post made on August 10, 2023.
IMF Report: Low Transaction Volume And Inactive Wallets
In a recent IMF Article IV consultation report released in May 2024, it was revealed that the number of eNaira wallets had grown to 13 million, although most of these wallets remain inactive.
Since the launch, the total volume of executed transactions amounted to 854,512, mostly consumer-to-merchant transactions, valued at N29.3 billion. The report also indicated that the slow adoption of the eNaira could be attributed to the CBN’s “phased approach,” which initially restricted the digital currency to bank account holders and domestic transactions.
A development journalist, Mayowa Tijani, downloaded the eNaira app and funded his wallet shortly after its launch. Speaking with TheCable, he noted that aside from waiving transaction fees at the start, the CBN failed to communicate the unique benefits of using the eNaira compared to regular banking apps.
“I just did not see any use that was beyond what the normal naira or bank apps would do.
“I feel like it was just following the craze of CBDCs because a number of countries in the world were discussing the possibility of CBDCs. So, the central bank just felt like it was a good idea to do the same. We did not deploy it really well in a way that it was going to be useful for anybody within the country.
“So, for me, now having it and wanting to use it, I was looking for people who had the same eNaira wallet. Of course, since the adoption was not great, a lot of people did not have it. At the end of the day, I couldn’t use it. I still had to do transfers from my bank. That’s probably why it died a natural death,” he said.
A blockchain and crypto expert, Solomon Amunde, also pointed to the unclear value proposition and limited use cases as factors stifling the adoption of the eNaira.
“I would say one of the major problems here, why it hasn’t gotten that wide adoption, is because it’s not being communicated properly, and it’s not being put in front of everyone.
“So, even if it’s useful, people don’t know that. Even if it promises lower transaction costs, people haven’t been able to see that yet.
“Ideally, eNaira should function like stablecoins such as USDT or USDC, facilitating instant transactions and financial inclusion. But if people can’t easily integrate it into their daily transactions, what’s the incentive to switch?” he said
To boost adoption, Amunde suggested that the federal government mandate the use of the eNaira for National Youth Service Corps (NYSC) members, civil servants, and government payments.
“Corp members should be paid through the eNaira. All government payments will be made via the eNaira. Civil servants should be mandated (give them two weeks or a month to submit their eNaira wallet details), and that’s the means through which they’ll be paid.
“Also, platforms that they have some form of control over, let’s say, if you want to pay for a driver’s license or an international passport, should include the eNaira as a payment option,” he said
