Nigeria launched its central bank digital currency (CBDC), known as the e-Naira, late last year. Following the launch, Nigeria became the first African country to release a CBDC. However, the CBDC is struggling to gain acceptance in Nigeria.
e-Naira CBDC acceptance remains low
Nigeria is turning to the informal sector to promote the adoption of e-Naira. The government is providing a 5% discount to drivers and passengers of motorized rickshaws that use the e-Naira. The company is attempting to support the growth of the e-Naira program.
The e-Naira has attracted only one out of 200 people in the country. The Nigerian central bank has turned its focus towards digital currency. Still, the move has created confusion because most Nigerians do not understand the difference between a government-backed digital currency and private digital currencies.
Motorized rickshaws are the most popular means of transport in Nigeria. The drivers of these rickshaws are now puzzled by the government’s frantic efforts to promote the e-Naira.
The Nigerian central bank banned commercial banks from extending cryptocurrency services. Therefore, some drivers of the rickshaws are now wondering why the government is promoting e-Naira when they have already informed the public that cryptocurrencies are bad.
Nigeria became the first African country to release its CBDC to the public. The country was targeting the nearly 40 million people who did not have bank accounts. However, this target is yet to be achieved because of the slow adoption of these currencies.
Cryptocurrencies have become attractive to Nigerians as they use these assets to hedge against inflation and a depreciating fiat. However, the eNaira is now seen as a symbol of the failing Nigerian economy and shows the distrust people have towards the ruling elite.
One of the key factors that the government needs to address is the lack of education on digital currencies. The central bank and the government need to invest in educating people about the CBDC.
Nigeria is the largest economy that has launched its CBDC to the public so far. Therefore, the progress of the e-Naira is being monitored by over 100 countries with plans to launch their own CBDCs. According to Josh Lipsky, the Senior Director of the Atlantic Council’s GeoEconomics Center, Nigeria’s CBDC project was important to the world.
The Nigerian central bank has attracted nearly 1 million people to its CBDC project. The institution is now targeting 8 million users by August next year. With a mobile penetration rate of 81%, eNaira has the potential to receive adoption from the vast underbanked population.
Crypto use in Nigeria remains high
Digital currencies have registered notable declines over the past year. In Nigeria, the speculative nature of these assets has seen them receive much attention. Some buy Bitcoin and other cryptocurrencies to bypass the foreign currency restrictions imposed by the central bank.
While the central bank has prevented commercial banks from facilitating cryptocurrency services, Nigeria has been ranked as the 11th country in the Crypto adoption index by Chainalysis. The growing adoption of cryptocurrencies in Nigeria follows the depreciation of the Nigerian fiat. The naira has dropped around six times since 2015. The inflation rate is also triggering concerns.
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