Key Points:
The IMF researchers have commended the eNaira’s debut year, stating that it has been “laudable”. However, the paper also has a few suggestions on how to further improve its performance.
It is worth noting that the eNaira was the world’s second CBDC, having launched in October 2021 after the Bahamian Sand Dollar. According to the paper, the eNaira’s retail side was intermediated, but it has yet to make its breakthrough beyond its initial adopters. The Central Bank of Nigeria introduced a phased introduction, which unfortunately has put off two of the CBDC’s biggest goals – extending financial inclusion to the unbanked and facilitating remittances – according to IMF officials.
The current usage of the eNaira is relatively low, with only about 1.5% of wallets being active on any given week. Additionally, there were only a total of 802,000 transactions during the timespan examined, which represents less than one per wallet. Furthermore, less than 1% of bank accounts in Nigeria have wallets. The paper has observed that breaking the initial low adoption equilibrium for any network products with similar traits, such as credit cards, requires a mix of clever strategies and luck.
The relationship between the eNaira and mobile money operators (MMOs) in Nigeria is a key question raised in the paper. The CBDC could either compete with the MMOs on the retail market or facilitate MMOs’ operations by providing a bridge between them. The paper has called the eNaira’s replacement of all the MMOs’ services “hard to imagine,” but also noted that a bridge function could set off a difficult “industry reshuffle.”
As a single-currency system, the IMF has mentioned that the eNaira is unable to accommodate remittances directly. However, this could be overcome either by allowing international money transfer operators to receive eNaira wallets or through intermediation. The researchers have recommended the former, though both options will remain expensive, which the IMF considers a serious problem in light of the parallel, underground market that serves the same purpose.
The paper has recommended a few steps for boosting eNaira usage. For instance, the eNaira could be used for social payments in conjunction with MMOs that improve the social cash transfer system and increase adoption. Merchants could also be incentivised to use the eNaira. The Central Bank of Nigeria has already started to work on inclusivity through the eNaira, according to the paper. However, remittances remain problematic, and resolving this issue is crucial for achieving the eNaira’s full potential.
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