IMF scores CBN’s eNaira ‘disappointingly low’, reveals challenges in new report

The International Monetary Fund (IMF) has stated that the adoption of Nigeria’s digital currency, eNaira, by Nigerians has been disappointingly low.

In a report dated May 2023 and obtained on Friday, titled; “Nigeria’s eNaira, One Year After,” the IMF said the phased approach chosen by the Central Bank of Nigeria (CBN) is to blame and its inability to force usage.

According to IMF, downloads have been slow since the eNaira recorded 500,000 downloads when it launched one year ago.

After reaching 500,000 downloads, it took 63 days to record 100,000 downloads. After an additional 143 days, the eNaira peaked at 700,000, but as of the end of November 2021, only 860,000 retail wallet downloads had been recorded, while merchant wallets are only 100,000 downloads.

This is just 0.8 per cent of Nigeria’s active bank accounts, indicating slow progress in the Central Bank Digital Currency (CBDC) initiative, considering only 14,000 eNaira transactions per week has been recorded since the digital currency was launched in October 2021.

“As indicated by the levels of wallet downloads and transactions, the public adoption of the eNaira thus far has been disappointingly low. However, it would be still too early to judge the fate of the eNaira project,” IMF said in the report.

The report further reads: “First, the slowness in eNaira take-up is not an unexpected outcome given CBN’s choice of a ‘phased approach’— initially granting access only to customers with bank accounts and restricting eNaira transactions to onshore uses only.

“Thus, the eNaira has, until recently, not presented tangible benefits to most of its wallet holders—given limited acceptance (e.g., low level of adoption by merchants and other retail customers) and availability (for these customers) of alternative means of payment (e.g., debit card, mobile banking apps)—which are more readily accepted.

“In fact, the total number of eNaira transactions since the inception (around 802,000) is less than the number of eNaira wallets—implying that bulk of the current wallet holders have not used their wallets more than once after opening their wallets.

“Second, even though the eNaira is a legal tender—its universal acceptance cannot be imposed on the public. And this makes the eNaira a network externality product—whose value increases with the size of the network.

“Like any network products with similar traits (e.g., credit card), breaking the initial low adoption equilibrium requires mix of clever strategies and luck. eNaira would also need to compete with the far-more established incumbent networks (e.g., mobile money)—which provides broadly the same service at the retail level. Weakness in public’s trust on Nigeria’s monetary system and the eNaira’s technological reliability is another important barrier that needs to be tackled.”

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