Why the eNaira is not yet useful to Nigerians

Nov 24, 2021|Adesola Afolabi

The eNaira is a puzzle.

Look at it one way, and it is a daring example of financial innovation from an African central bank, an initiative that could transform Nigeria’s financial system—and the broader economy—in unfathomable ways.

Bigger than BVN. Bigger than ATM cards. A central bank digital currency (CBDC) is as big as it gets.

Look at it another way, and it is a poster child for the perils of government innovation. Designed as a peculiar digital version of the naira, it inherits the negatives of the naira (depreciation, volatility) and cryptocurrencies (complexity, opacity). Yet, it lacks the positives of the naira (familiar, universal) and cryptocurrencies (decentralised).

Everyone has a different take on the eNaira. Few people know whether it is going to work. More intriguing, though, is that few people know what it is supposed to do


Some takeaways:

  • Assessing the need for a digital currency depends on the issuing country’s context. For example, the high cash in circulation is one reason Nigeria wants a digital currency. However, cashless economies like Sweden are still vying for digital currency.

  • We can measure the eNaira's success by assessing what the digital currency is supposed to do. The eNaira can facilitate a reduction in cash processing costs and an efficient payment system. But this is not yet likely. Partnerships with International Money Transfer Operators or foreign banks needed to make this won’t happen until future phases of the eNaira.

  • Therefore, the current (early) version of the eNaira still needs more work before it can achieve its financial inclusion or cross-border payment goals.

Amid all the forced hype about Nigeria launching a digital currency and the still-a-pilot-but-ultimately-underwhelming design of the eNaira, it is worth asking how deeply those involved thought about what the eNaira is supposed to do. What does success look like for the eNaira? Do those metrics change over time? Do different metrics apply to different groups?

Needless to say, these are important questions.

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