Despite intensified efforts by the Central Bank of Nigeria, the digital currency faces challenges and strong resistance from the local population.
The eNaira, the digital currency of the Central Bank of Nigeria, was the first CBDC to be launched in Africa on October 25, 2021.
The introduction of the eNaira came after the Central Bank of Nigeria (CBN) banned commercial banks from providing services to cryptocurrency exchanges, instructing them to close accounts linked to companies operating in the sector.
For the launch phase of the CBDC, the Central Bank opted for a phased approach. During the initial phase, only holders of a bank account could access the eNaira. The next phase involved expanding access to the so-called unbanked population. According to data from the Central Bank and Enhancing Financial Innovation and Access, about 36% of the Nigerian population does not have a bank account.
Based on the level of identification provided, a higher transaction limit is allowed. With a phone number and a verified national identity, users can make payments of up to 50,000 Naira ($55) per day, increasing to 200,000 Naira ($222) by providing additional documentation.
The goals and the low adoption
The government’s stated goals were to increase financial inclusion, facilitate remittances from abroad and international transactions, and encourage digital payments.
Despite the government’s intentions, the adoption of eNaira has remained rather low. As of April 2022, only 2 million people out of 217 had downloaded the eNaira app, and only 100,000 transactions had been made.
By October 2022, six months later, less than 0.5% of the Nigerian population had reported using eNaira for transactions.
The low adoption of the digital currency can be attributed to several factors. Firstly, the distrust and skepticism of the population towards the Nigerian government have posed a significant obstacle.
Additionally, concerns about increasingly pervasive financial surveillance, control over money, and the population’s preference for using cash have all contributed to keeping the adoption of digital currency low.
The government’s countermeasures
The poor adoption results have prompted the Central Bank of Nigeria to intensify efforts to increase the usage of eNaira.
On December 6, 2022, the Nigerian government announced the imposition of a limit for ATM withdrawals of 100,000 naira ($111) per week. Following some protests from the population, this limit was raised to 500,000 naira ($555) per week.
The Central Bank has also reduced the number of ATMs and distributed bonuses in eNaira to citizens.
The current situation
The situation of eNaira is still evolving. Despite the usage of the CBDC having slightly increased in recent months, it remains very low.
Another factor that may have hindered the adoption of the currency is the devaluation of the Nigerian naira. Since 2015, the naira has devalued almost six times against the U.S. dollar, making eNaira less attractive to Nigerian citizens who prefer to preserve their savings in more stable currencies.
On January 25, 2024, the official exchange rate reached a new low, reaching up to 1,421 naira per dollar, and then returning to 910 naira.
The depreciation of the naira seems to be caused by the recent change in government in the country. With the inauguration of President Bola Tinubu, the successor to Muhammadu Buhari, and the introduction of the new Governor of the Central Bank of Nigeria replacing the former Governor Godwin Emefiele, the naira exchange rate has experienced a significant decline.
During Governor Emefiele’s tenure, the Central Bank maintained a fixed exchange rate of the naira against the dollar, just below 500 naira per dollar. After the change in leadership at the CBN, the naira has undergone a constant devaluation against major foreign currencies both in the official and black markets.
