Connect with us

General News

Why Nigerians Aren’t Turning to the eNaira Despite Crippling Cash Shortages



Why Nigerians Aren't Turning to the eNaira Despite Crippling Cash Shortages

The digital iteration of the naira, which was issued by the Central Bank of Nigeria in October 2021, hasn’t had the most impressive start and adoption has been slow. But even if people in Nigeria wanted to turn to the eNaira, transaction options with the central bank digital currency, or CBDC, are limited.

“They want to put it out there to get people to use it, but people don’t have enough places to use it,” said Nigerian native Adesoji Solanke, a director at Renaissance Capital, an emerging and frontier markets-focused investment bank that has a branch in Nigeria.

There may be a dearth of merchants willing to accept the eNaira, according to London-based Varun Paul, CBDC and market infrastructure director at institutional crypto custody platform Fireblocks. Paul, who previously worked at the Bank of England as an economist and head of its fintech hub, is now leading Fireblocks’ efforts to build out infrastructure for CBDC integration.

“So you have this chicken and egg problem,” he said.

At the end of 2022, outgoing President Muhammadu Buhari’s government decided to change the currency design and swap out old bank notes for new ones. The slow changeover caused ATMs to dry out quickly, and the government placed limits on withdrawals.

Nigeria’s informal economy thrives on cash, and so cash shortages have left everyone from street vendors to bus drivers frustrated, Solanke added.

While protests in Nigerian cities turned violent, citizens also took to Twitter to complain about not being able to access basic necessities like fuel or food without cash.

A year after the launch of the eNaira, less than 0.5% of Nigerians were using it, Bloomberg reported. By last August, the eNaira was used to carry out transactions worth 4 billion naira ($9.3 million). Comparatively, in 2020, Nigerians conducted $26 billion worth of ATM transactions.

Despite the central bank’s efforts, people haven’t turned to the eNaira as a solution during the current cash shortage because the necessary infrastructure wasn’t in place to foster adoption, both Solanke and Paul said.

“I think there’s a couple of things they may have wished they did better,” Paul said, referring to Nigeria’s leaders. “One is they went out faster than anyone else, whereas other central banks around the world are researching a lot longer.”

In addition to issues of infrastructure, not everyone can readily access the eNaira, Solanke said.

“The challenge is that the wallet requires you to have a smartphone and use the internet, but think of the people you’re trying to send money to, they’re relatively poor, right?” Solanke said. “So the cost of the smartphone, the cost of the internet, these are just some of the hindrances to get some of these things up and running.“

There have been some attempts at expanding infrastructure digital payments with the eNaira. In September 2022, popular African payments platform Flutterwave added the currency as a payment option for merchants.

Earlier this week, Bloomberg reported that the central bank was on the lookout for new tech partners to build out a new system to support the eNaira.

But Solanke said that “there’s a lot of work that needs to happen both at the customer end and also at the merchant end to really get it up and running,” something Nigeria’s next president will have to grapple with.

Disclaimer: No copyright infringement intended. All rights and credits reserved to respective owner(s).

Continue Reading
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *