The Central Bank of Nigeria’s prohibition on regulated financial entities from engaging with crypto exchanges in 2021 has emerged as a significant stumbling block for the uptake of the eNaira, the country’s central bank digital currency (CBDC), asserts Chinedu Albert, a legal expert specializing in Nigerian tech and innovation. While the eNaira represents the government’s attempt to counter the repercussions of its broad ban on cryptocurrency and digital assets, it still struggles to resonate with citizens due to its lack of inherent characteristics that shield against governmental interventions and inflation, a hallmark trait of many cryptocurrencies.
Nigeria had garnered attention in 2021 for its robust presence in Chainalysis’ Global Crypto Adoption Index, indicative of a populace seeking refuge in currencies insulated from governmental policies and economic fluctuations. A recent study by crypto exchange KuCoin revealed a growing trend among Nigerian citizens towards utilizing cryptocurrencies as a reliable means of asset storage and transfer, particularly as the Nigerian naira witnessed a significant depreciation of 23% in the third quarter of 2023. This devaluation has prompted local investors to turn to deflationary assets like Bitcoin.
Despite the Central Bank of Nigeria’s decision to rescind the ban on digital assets for banks and financial institutions in December, the eNaira continues to grapple with a prevailing trust deficit. Instances such as the crypto ban, the shuttering of crypto-associated bank accounts, currency manipulations, and even a recent redesign of the naira have collectively left a negative imprint on Nigerians’ perception of the central bank and its policies.
As Africa’s pioneering CBDC, the eNaira’s journey since its launch on October 25, 2021, has been marred by challenges. A report by the International Monetary Fund in May 2023 revealed that despite being accessible for transactions by all, weekly eNaira transactions amounted to a mere 1.5% of total wallets, reflecting a dishearteningly low adoption rate, with a staggering 98.5% of wallets lying dormant each week.