eNaira: How not to adopt a cashless policy – The future of eNaira, the first Central Bank Digital Currency (CBDC) in the world, is uncertain two years after it was launched and billions of naira were spent to build and promote it. Its biggest problem is still that it can’t get people to use it.
In May 2022, the International Monetary Fund (IMF) released a report that was not good for the CBDC. The report showed that less than 1% of banking users in Nigeria downloaded the wallet two years after it came out, on October 25, 2021. The number of downloaded wallets was more than the number of transactions, which was 802,000.
But by 2023, there will be more than 12 times as many wallets, or 13 million. So far, the total amount of transactions has gone up by 63%, to N22 billion ($48 million). That’s a small number for a country where there are almost 110 million adults.
As of September 2023, less than 1 million people had downloaded the eNaira wallet from the Google Play store, and the site was ranked 4,062 in Nigeria by Similarweb. Users also keep talking about how bad the service is on the site.
A user on X (formerly Twitter) with the name @Cicerorian said he still uses the eNaira and it works “very fine” for him. “Their customer service is almost nonexistent, and it’s hard to solve even simple problems.”
When the Central Bank of Nigeria (CBN) introduced the eNaira in October 2021, it said the goal was to make it easier for people to use money and to get tax breaks, which would help the economy in the long run. Experts, on the other hand, have said that the way it was used is a clear example of how not to drive financial inclusion policy. They say that the following things have stopped many people from using the eNaira.
Launch of eNaira and a ban on crypto
The CBN slammed a sledgehammer down on Nigeria’s growing cryptocurrency market in the same month that the eNaira came out. This froze billions of naira in users’ funds on the different crypto exchanges. When cryptocurrency platforms couldn’t use banking services and their accounts were closed, the market was thrown into chaos, and users were hurt in a big way.
So, when the same CBN came back later with its own digital money, it didn’t do a good job of explaining what it did and how it was different from the digital currency it had banned. As a result, most people didn’t care much about it. According to a report from the IMF, it took 25 days for the number of downloaded eNaira wallets to reach 500,000 units. From there, it took another 63 days to reach 600,000 units, and yet another 143 days to reach 700,000 units. In October 2022, Bloomberg stated that less than 1.22 million Nigerians had used the eNaira wallet. The eNaira Speed Wallet app has a grade of 2.9 on the Android Play Store and 2.2 on the iOS App Store, which shows what customers think of it.
Experts in the crypto business said they were not asked about the ban before it was made. Before the ban, they had been talking with the top bank, and there were some signs that they were on to something.
Low buy-in from business
One of the first problems with the eNaira was that the Central Bank of Nigeria (CBN) couldn’t convince the financial services industry that it was a good idea that would pay off. First, because the top bank was in charge of the platform, no one else could add their own services on top of it.
The eNaira is a debt of the Central Bank of Nigeria (CBN). It is saved in digital wallets and can be used to make payments. All eNaira transactions are handled in real time and recorded by a CBN system that uses a distributed ledger (DLT)11. However, transactions with retail CBDC clients (like exchanging CBDC for cash or deposits held by retail clients) are all handled by financial institutions, mostly banks, and the CBN only deals directly with them.
Since the Central Bank of Nigeria (CBN) controls everything about the eNaira and gives private banks few reasons to use the platform, only a few of them felt the need to promote digital money for their currency. Also, the eNaira is very similar to the digital banking services that banks have already started offering. This is one of the things that the IMF says holds CBDCs back.
A “CBDC’s appeal to users as digital money will likely be restricted because there is already private digital money with similar or better features (like bank deposits that can be paid quickly). But it also says that in places with few banks and unreliable settlement systems, CBDC may become more appealing to users. This is especially true if private digital money that is fully backed by cash, like mobile money, does not exist.
Without the help of banks and other financial companies, the eNaira will not be able to reach as many people. The top bank has made deals with fintech companies like Flutterwave to work together. The government also added Near Field Communication to the eNaira app. This is a technology that lets two devices, such as a cell phone and a payment terminal, talk to each other when they are close. This makes it possible for the app to accept contactless funds quickly.
“I think it would have solved the problem of transfers that didn’t go through and banks charging too much. The advertising isn’t very good, and banks saw it as a rival. This has made it much harder for many people to adopt. Worse yet, there are no rewards, and there is no network effect,” said X user Goodnews Emmanuel.
A senior officer at one of the country’s biggest consulting groups said that the CBN should give up on the eNaira project and move on.
