The world’s second-ever CBDC has yet to reach 1% of Nigeria’s population, according to the IMF assessment.
Nigeria’s eNaira central bank digital currency (CBDC) is over a year old, and the International Monetary Fund (IMF) has a late birthday present for it in the shape of a working-out paper assessing its initial year of performance. “ Laudable, ” told IMF investigators regarding the eNaira's debut year, but there were some suggestions too.
The eNaira was the world’s alternative CBDC, premiering in October 2021, after the Bahamian Sand Dollar. The paper found the eNaira's retail side was intermediated, but had no problems with latency, as it has yet to make its breakthrough beyond its first adopters. The Central Bank of Nigeria presented a phased preface, which put off two of the CBDC’s biggest purposes, extending financial inclusion to the unbanked and facilitating remittances, according to IMF officials.
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Solely about 1.5% of wallets are active on any week, and there was alone a whole of 802,000 transactions during the timespan examined. The numbers represent lower than one per wallet, and less than 1% of the bank accounts in the country have wallets. The paper observed:
“Like any network products with similar traits (e.g., credit card), breaking the initial low adoption equilibrium requires mix of clever strategies and luck.”
Mobile money operators (MMOs) have a vast network in Nigeria, and eNaira’s association with that network is a crucial question raised in the paper. The CBDC could compete with the MMOs on the retail market or facilitate MMOs ’ operations by giving a bridge between them. The paper called the eNaira’s replacement of all the MMOs ’ services “ hard to imagine, ” but similarly remarked that a bridge function could set off a difficult “ industry reshuffle. ”
As a single-currency system, IMF says the eNaira is unable to accommodate remittances straight, but adverted this could be overcome either by permitting international money transfer operators to receive eNaira wallets or through intermediation. Experimenters recommended the former, though both options will remain expensive, which the IMF considers a serious challenge in light of the parallel, underground market that serves the equal purpose.
The paper recommends some steps for boosting eNaira use, similar to using it for social payments in conjunction with MMOs that upgrade the social cash transfer system and raise adoption. Merchants could similarly be incentivized to utilize the eNaira. The Central Bank of Nigeria has started to work on inclusivity through the eNaira, the paper notes, but remittances stay problematic.
(DEREK ANDERSEN, Cointelegraph, 2023)