According to an assessment by the International Monetary Fund (IMF), Nigeria’s eNaira, the second-ever central bank digital currency (CBDC), has not yet reached 1% of the country’s population. The IMF’s evaluation, presented in a working paper, acknowledges the eNaira’s commendable aspects but also offers suggestions for enhancement.
Launched in October 2021, following the Bahamian Sand Dollar, the eNaira’s retail side demonstrated no latency issues but struggled to extend beyond initial adopters, hindering its key objectives of promoting financial inclusion among the unbanked and facilitating remittances, as determined by IMF officials. The Central Bank of Nigeria (CBN) implemented a phased introduction, which delayed the achievement of these goals.
The assessment revealed that only approximately 1.5% of wallets were active on a weekly basis, with a total of 802,000 transactions recorded during the evaluated period. These figures indicate less than one transaction per wallet and less than 1% of bank accounts in the country having eNaira wallets. The paper highlights the need for innovative strategies and some element of luck to break the initial low adoption equilibrium, comparing it to other network products such as credit cards.
The paper also raises the question of the eNaira’s relationship with mobile money operators (MMOs) in Nigeria, who possess an extensive network. It suggests that the eNaira could either compete with MMOs in the retail market or facilitate their operations by acting as a bridge between them. While completely replacing the services of MMOs is deemed difficult to imagine, the notion of a bridge function could potentially trigger a significant industry reshuffle.
As a single-currency system, the eNaira currently lacks direct support for remittances. However, the IMF proposes two solutions: allowing international money transfer operators (IMTOs) to receive eNaira wallets or utilizing intermediaries. The paper recommends the former option, although it acknowledges that both approaches remain costly. This issue is particularly significant considering the existence of a parallel underground market that serves a similar purpose.
To increase eNaira adoption, the paper suggests several measures, including integrating it into social payment systems in collaboration with MMOs to enhance the social cash transfer system and drive adoption. Additionally, incentivizing merchants to accept eNaira could also promote its usage. While the CBN has initiated efforts to foster inclusivity through the eNaira, the paper highlights that challenges persist in the realm of remittances.