eNaira: An Example of How to Avoid Implementing an Effective Cashless Policy

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The eNaira, the world’s inaugural Central Bank Digital Currency (CBDC), finds itself in an uncertain position two years after its launch, despite substantial investments in its development and promotion. Its primary challenge remains its inability to attract users.

In May 2022, the International Monetary Fund (IMF) released an unfavorable report indicating that less than one percent of Nigeria’s banking customers had downloaded the eNaira wallet two years after its October 25, 2021 release. The volume of transactions, at 802,000, fell short of the number of downloaded wallets, which reached 919,000.

However, by 2023, the number of wallets had surged more than 12-fold to 13 million, and the total transaction value had risen by 63 percent to N22 billion ($48 million). Yet, for a country with nearly 110 million adults, these figures remain relatively modest.

As of September 2023, the eNaira wallet’s total installs on the Google Play store still languish below 1 million, and its website ranks 4,062 in Nigeria, according to Similarweb. Users continue to voice concerns about the platform’s subpar service.

One user on X (formerly Twitter) praised the eNaira’s functionality but criticized its nonexistent customer service. When the Central Bank of Nigeria (CBN) introduced the eNaira in October 2021, it aimed to enhance financial inclusion and stimulate economic growth. However, experts argue that its implementation serves as an example of how not to drive financial inclusion policy. Several factors have deterred potential users from embracing the eNaira:

1. eNaira Launch and Cryptocurrency Ban: The eNaira debuted in the same month that the CBN imposed severe restrictions on the thriving cryptocurrency market in Nigeria, causing significant losses for users. The subsequent launch of digital money by the same CBN, without clear differentiation from the banned digital currency, led to apathy among potential users.

2. Low Industry Support: The CBN failed to convince the financial services industry of the eNaira’s viability and potential return on investment. The CBN maintained strict control over the platform, disallowing third-party services, which limited commercial banks’ incentives to promote digital money. The eNaira essentially replicated services already offered by individual banks, as highlighted by the IMF’s concerns about CBDCs.

3. Limited Banking Buy-In: Without active support from banks and financial institutions, the eNaira’s reach remained restricted. While the CBN formed partnerships with fintech companies like Flutterwave and improved the eNaira app with Near Field Communication technology, the lack of incentives and network effects hindered mass adoption.

In conclusion, some experts suggest that the CBN should reconsider its approach to the eNaira project to overcome these challenges and foster broader acceptance.

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