eNaira is the type of Central Bank Digital Currencies, CBDC, released by the Central Bank of Nigeria, CBN and launched by President Muhammadu Buhari on October 25 2021. The eNaira is Africa’s first digital currency and one of the first types of fiat money globally.
The waves of CBDC globally are still at the teething stage with most developed economies like the United States, United Kingdom, European Union and others still exploring the necessity of a digital currency at research or proof of concept levels, the countries that have released a CBDC are mostly developing economies such as the Bahamas, Caribbean, Nigeria, India, Grenada, Dominica and Saint Lucia. Only China and Russia are the developed economies with a CBDC.
According to Investopedia ‘Central Bank Digital Currencies are a form of digital currency that is issued by a country’s central bank. They are similar to cryptocurrencies, except their value is fixed by the central bank and equivalent to the country’s fiat currency.’
Although the CBDC has the overall goal of promoting financial inclusion and stabilising the monetary fiscal policy, it affords users financial security, privacy, convenience, accessibility, transferability, cheaper cost of transacting, removes cross-border barriers and lower the risk of transacting.
It is widely believed that eNaira is facing a rocky start because of a lower adoption rate among Nigerians.
Some likely challenges the eNaira is facing;
Poor public education and awareness – it’s appalling that after fifteen months of its existence, most Nigerians especially those at the bottom of the pyramid who are financially excluded do not know about digital currency. Similarly, those who know about it, especially the elites cannot clearly see the difference between eNaira and the physical Naira nor do they know the advantage of the latter over the former.
Poor infrastructure – being an electronic form of money, it requires mobile and telecommunication infrastructures to run and be accessed by Nigerians. Most of the people whom eNaira is expected to bring to the financial inclusion net, those in the rural areas who are mostly illiterate also have limited access to mobile and telecommunications infrastructure. The inability to access this infrastructure already forfeits the objective of the currency.
Unclear use cases – although the CBN claims that they are systematically implementing various phases of eNaira, it is obvious the apex Bank has not thought out various applicable use cases of the currency because most financial technology, Fintech players are finding it difficult to implement eNaira.
eNaira versus Bitcoin and other cryptocurrencies, crypto issue – Nigeria is among the top countries in the world where cryptocurrencies such as Bitcoin, Ethereum, BNB and others enjoy wide adoption, especially among the youths. Some youths hold the crypto, let it appreciate and sell it while others simply trade them as commodities to make money. Instead of the CBN regulating digital currencies, it went ahead banning them and created an alternative digital currency known as eNaira. In a retaliatory move by the youths, they have refused to have anything to do with eNaira. Despite the ban, Nigeria continues to lead the charge globally in peer-to-peer crypto trading statistics.
To increase the adoption of eNaira, the CBN needs to come to terms with the challenges highlighted in this article.
The Bank needs to increase its public education and enlightenment activities on digital currency down to the last mile.
multi stakeholders approach needs to be explored to address the infrastructural challenges. The Bank may also need to consider putting in place a regulation that would allow the eNaira and other digital currencies to cohabitate to warm the hearts of the Nigerian youths who are indignant again the eNaira. It may also need to engage key players in the financial services sector to map out the use cases of the CBDC.
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