eNaira’s First Anniversary Holds Lessons for CBDC Boosters

If there’s one lesson to take away from the first anniversary of Nigeria’s struggling eNaira central bank digital currency (CBDC), it’s that China has shown wisdom with its extremely slow rollout of its digital yuan.

A Tuesday (Oct. 25) ceremony by the Central Bank of Nigeria (CBN) revealed that little progress has been made in the three months since CBN Governor Godwin Emefiele chastised banks for “apathy” in promoting the CBDC to the nation’s 200 million citizens.

For one thing, at that time, Emefiele said that only 700,000 Nigerians had downloaded the digital wallet of the official digital currency, which is legal tender just like the traditional naira.

That number had risen to about 1 million at Tuesday’s ceremony, Bloomberg reported. But VoA Africa reported that during the event, central bank officials said that about 700,000 transactions worth $18.3 million had been made on the eNaira’s platform in the first year.

Note the discrepancy: 300,000 more wallets had been downloaded than had actually been used.

The What?

The eNaira’s rollout has been a very quiet affair, with little effort taken to convince citizens to use it or banks to support an asset they — like American banks — fear will disintermediate them from customers and cost them fee income.

At the anniversary event, a CBN official said, “From today, we are going to carry out this sensitization program through all the nooks and crannies of this country until eNaira is widely accepted,” Nigerian news outlet Leadership reported.

That led one local FinTech executive to comment, “This kind of campaign is supposed to have been carried along at the launch of the project,” VoA reported. “There’s supposed to have been this massive enlightenment, awareness, incentivization for adoption, not waiting for one year. Why do you have to wait for one year before you begin grassroot sensitization?”

Beyond that, the eNaira is competing with cryptocurrencies like bitcoin, which are very popular in the country despite the CBN’s ban on banks supporting them.

Last month, blockchain data firm Chainalysis’ 2022 Global Crypto Adoption Index put Nigeria at No. 11 worldwide.

For one thing, competing cryptos can be used as an investment, whereas the eNaira doesn’t offer interest. Nigeria has seen a 40% devaluation of the naira in the past year, the VoA reported. And the CBN’s own figures show inflation jumped above 20% in August.

Bankers’ Fears

On the banking side, Fintech Association of Nigeria Chief Operating Officer Babatunde Obrimah told Bloomberg that as “money loaded on eNaira wallets not counting as cash on a lender’s book, banks also have little incentive to market the digital currency.”

Nigeria’s Daily Independent quoted an analyst in September saying, “the role of deposit money banks would be to take responsibility for conducting [know your customer (KYC)] and [anti-money laundering (AML)] compliance compatibility on merchant eNaira wallets as well as monitoring illicit activity.”

Which are cost centers for banks, not profit centers.

Another benefit the CBN has been touting is that the eNaira would let the unbanked open wallets without a bank account, which holds no benefit for the banks in a country where only about one-quarter of the citizens have accounts.

A Bigger Stick

Compare that to China, where the People’s Bank of China reported 360 million transactions using its digital yuan, formally known as e-CNY, on $14 billion in spending.

Certainly, it’s not exactly a fair comparison, as China launched the e-CNY in limited release April 2020, its population of 1.4 billion is seven times that of Nigeria’s, and most importantly, its economy is relatively strong.

The real difference, however, is the aggressive yet slow-moving campaign the PBoC has launched to convince citizens to use the e-CNY. It banned all private cryptocurrencies, has changed the law to force dominant digital payment providers AliPay and WeChat to share a payments system with the CBDC, and has run extensive marketing campaigns.

And with all that, China is still struggling to get consumers to use the digital yuan.

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