Central banks around the world are accelerating efforts to launch digital currencies as part of a broader strategy to modernize the financial system, increase payment efficiency and drive financial inclusion.
Countries such as the Bahamas, Nigeria and Jamaica have successfully launched Central Bank Digital Currencies (CBDCs), although both adoption and success levels are different.
According to the Atlantic Commission, the U.S. think tank is a CBDC issued and supported by a central bank.
As of now, 134 countries and trade unions that account for 98% of global GDP are exploring CBDC, with only 35 countries increasing dramatically in May 2020. Currently, 66 countries are in the advanced stage of development, pilot testing, or have launched digital currencies.
Nigeria is the first country in Africa to introduce CBDC, which launched Enaira in October 2021.
Digital currency pegged to the Nigerian Naira unveiled by former president Muhammad Buhari. Its main purpose is to promote financial inclusion by incorporating a bankless population into the country’s financial system.
The Central Bank of Nigeria (CBN) highlighted some of the benefits of Enaira, including reducing the cost of printing currencies, creating fast and reliable payment systems, supporting the digital economy, simplifying cross-border payments, and improving economic activity.
Enaira also aims to improve the effectiveness of monetary policy, promote targeted social interventions, and simplify tax remittances and collections, aiming to support Nigeria’s economic growth.
Centralized alternatives to cryptocurrencies
Enaira is part of the CBN strategy to curb the use of cryptocurrencies that are considered volatile and anonymous. Unlike cryptocurrencies, Enaira operates within a centralized system, enabling CBNs to monitor transactions, control wallet access and regulate holders’ purchasing power.
The Enaira app has seen a lot of downloads in the weeks since its launch, and by November 2021, there were more than 589,000 downloads on iOS and Android stores.
The app downloads an average of 20,000 per day, and by January 2022, it has exceeded 694,000 downloads and has processed more than 35,000 transactions. CBN also reported that the platform handled transactions worth less than $10 million later that year.
Despite the enthusiasm in the early days, the adoption rate of Enaira remains disappointing. An International Monetary Fund report in July 2023 showed that only 0.5% of Nigerians adopted Enaira, with 98.5% of wallets remaining inactive a year after their launch.
More than three years later, adoption rates continue to lag behind, and public perceptions of digital currencies are largely negative.
The IMF calls public adoption of Enaira a “disappointing low”. On social media, users laughed at the program, such as terms like “e-vanish,” “ee-quaporate,” and “e Dead,” indicating that the currency has failed to gain momentum.
The more complex problem is that the Enaira mobile app is designed to easily access digital currencies but is still removed from the Google Play Store, although it is still available on the Apple Store.
Additionally, the USSD code (*997#) designed to facilitate transactions for users without smartphones has been proven to be non-functional. Enaira’s official social media account is largely inactive, with the last post published on August 10, 2023.
IMF Report: Low volume and inactive wallets
In the IMF’s recent IV consultation report released in May 2024, it was shown that the number of Enaira wallets has grown to 13 million, although most of these wallets are still inactive.
Since its launch, the total number of transactions executed is 854,512, mainly consumer-to-merger transactions, with a value of 29.3 billion guilds. The report also suggests that ENAIRA’s slow adoption can be attributed to the “phased approach” of CBN, which initially restricts digital currencies to bank account holders and domestic transactions.
Development journalist Mayowa Tijani downloaded the Enaira app and funded his wallet shortly after it was launched. Speaking at Thecable, he noted that the unique benefits of using Enaira cannot be conveyed in addition to giving up transaction fees at the beginning, CBN compared to conventional banking applications.
“I just didn’t see anything that is more than normal naira or banking apps can do.
“I feel like this is just following the CBDC boom, because many countries around the world are discussing the possibility of CBDC. So the central bank just feels it’s a good idea to do it. We’re not deploying it so well in some way that it’s useful to anyone in the country.
“So, for me, now owning it and wanting to use it, I’ve been looking for people who have the same enaira wallet. Of course, since adoption is not very good, a lot of people don’t have it. The end, I can’t use it. I still have to do a turnaround from the bank. That’s probably why it died naturally,” He said.
Solomon Amunde, a blockchain and crypto expert, also pointed to unclear value propositions and limited use cases as factors that killed the adoption of Enaira.
“I would say one of the main questions here, why it didn’t get so much adoption, is because it didn’t get the right communication and wasn’t put in front of everyone.
“So, even if it works, people don’t know. Even if they promise to reduce transaction costs, people can’t see this.
“Ideally, Enaira should feature Stablecoins like USDT or USDC that promotes instant transactions and financial inclusion. But what are the motivations to switch if people can’t easily integrate it into their daily transactions?” He said
To improve adoption, Armond suggested that the federal government require enaira to be used for NYSC members, civil servants and government payments.
“Corp members should be paid through Enaira. All government payments will be made through Enaira. Civil servants should be authorized (give them two weeks or a month to submit details of Enaira Wallet) and that is the means to pay them.
“In addition, they have some form of control platform, for example, if you want to pay for a driver’s license or international passport, Enaira should be included as a payment method,” he said. He said
