One year after, IMF scores eNaira adoption in Nigeria disappointingly low
By Onome Amuge
The International Monetary Fund (IMF) has described the adoption of Nigeria’s digital currency, eNaira, by Nigerians as disappointingly low,noting that the CBN-facilitated project is yet to present tangible benefits to most of its wallet holders after one year of operation.
The financial agency of the United Nations stated this in a May 2023 working paper titled; “Nigeria’s eNaira, One Year After”.
According to the IMF, despite the laudable undisrupted operation for the first full year, the Central Bank Digital Currency (CBD) project, which is the first in Africa, has not yet moved beyond the initial wave of limited adoption.
The slowness in the eNaira’s take-up was attributed to the CBN’s choice of a phased approach, as the apex bank initially granted access only to customers with bank accounts and restricted eNaira transactions to onshore uses only.
The IMF pointed out that even though the eNaira is a legal tender, its universal acceptance cannot be imposed on the public, adding that weakness in the public’s trust on Nigeria’s monetary system and the eNaira’s technological reliability is another important barrier that needs to be tackled.
“Thus, the eNaira has, until recently, not presented tangible benefits to most of its wallet holders—given limited acceptance (e.g., low level of adoption by merchants and other retail customers) and availability (for these customers) of alternative means of payment (e.g., debit card, mobile banking apps)—which are more readily accepted,” the report said.
Giving a breakdown of the e-Naira’s download rate since its official launch in October 2021, the IMF said after reaching 500,000 downloads, it took 63 days for the eNaira to record 100,000 downloads. It further observed that after an additional 143 days, the eNaira peaked at 700,000, but as of the end of November 2021, only 860,000 retail wallet downloads had been recorded, while merchant wallets are only 100,000 downloads.
This, the report explained, is just 0.8 per cent of Nigeria’s active bank accounts, indicating slow progress in the CBDC initiative, considering only 14,000 eNaira transactions per week have been recorded since the launch of the digital currency.
It also found that the total number of eNaira transactions since the inception is less than the number of eNaira wallets, an indication that bulk of the current wallet holders have not used their wallets more than once after opening their wallets.
In addition, the report highlighted the significance of competing with well-established incumbent networks, such as mobile money, which already provide widely accepted retail-level services.
The report, however, noted that despite the disappointing public adoption of the eNaira, it would be still too early to judge the fate of the eNaira project.
While the report identified the challenges hindering penetration of the eNaira, it also acknowledged that the CBN has made significant efforts towards the progression of the eNaira project.
The IMF highlighted the CBN’s positive actions to include:
-Expanding the eNaira coverage to people without bank accounts but with mobile phones and KYC, and to those without internet access through USSD technology.
-Creating accessibility for individuals to open eNaira wallets,load their balances through cash-in services through agency banking networks, mobile money transfers and third party transfers.
-Intensified public adoption campaign to actively promote eNaira usage by encouraging major supermarkets and hotels to participate in its merchant network
-Providing stipend to CBN staff through the eNaira
-Hosting developer Heckathons for promotion and discovery of eNaira use cases
According to the IMF, broadening the eNaira’s public adoption and realising its enabling potential will require careful consideration of policy adjustments. It also stated that certain aspects of current exchange rate policy, if left unaddressed, would keep blocking the eNaira’s usage for remittances.
On the other hand, it said the use of the eNaira for social cash transfer programmes will help unlock its potential for financial inclusion.
The report concluded that a possible future breakthrough in the eNaira adoption may lead to liquidity and funding shocks and new forms of Anti Money laundering (AML) and Combating the Finance of Technology (CFT) risks, which requires continued vigilance.