How has Nigeria’s digital currency performed since its launch? | Crypto News

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Abuja, Nigeria – James Ndubuisi, in-house lawyer for Lagos-based entertainment company SoundHive Group, is sure he doesn’t need eNaira – Nigeria’s official digital currency – or its app.

“He has to be scrapped entirely,” the 30-year-old told Al Jazeera.

He downloaded the app the same day it was released – October 25, 2021. Months later, he says its features aren’t useful or reasonable.

When asked if he knew that eNaira could be accessed via USSD codes – a quick shortcode available even to users without a smartphone – and if he would consider trying this option, Ndubuisi simply replied: “ Never heard that. Not interested in knowing.

When eNaira, the digital form of the naira and Africa’s first national digital currency, was launched by the Central Bank of Nigeria (CBN), officials at the apex bank said it would enable financial inclusion and tax benefits to ultimately stimulate the economy.

In a televised address at the time, President Muhammadu Buhari said the adoption of eNaira and blockchain technology “can boost Nigeria’s GDP by $29 billion over the next 10 years.”

eNaira was created as part of the CBN’s cashless policy to improve cross-border trade, expand access to financial services, increase remittances from a broad diaspora base, and ultimately boost economic growth. economy of the country.

Half of Nigeria’s approximately 200 million people do not have access to bank accounts. The apex bank therefore said it hoped to facilitate day-to-day transactions between business owners and their producers and customers across the country.

Six months later, analysts wonder if the new digital platform will succeed where the traditional banking system has failed.

Offer and demand

According to a report by Enhancing Financial Innovation & Access (PDF), only a third of Nigerians living in rural areas are near financial service providers. And even for those in urban areas, the continuous fluctuations of the naira against the US dollar still cause recurring frustrations.

Unsurprisingly, many are looking for alternatives.

In April 2022, cryptocurrency exchange Kucoin reported that 33.4 million Nigerians trade or own crypto assets despite restrictions on cryptocurrency transactions by the CBN, using peer-to-peer networks .

The introduction of eNaira came seven months after the CBN restricted cryptocurrency transactions, as digital coins have become well suited to conduct many illegal activities “including terrorist financing and tax evasion. “.

Unsurprisingly, it is seen by some members of the public as a natural response to the trend of increasing cryptocurrency usage, but the jury is still out on whether eNaira can improve financial inclusion.

“Digital currency adoption is definitely on the rise, as businesses and individuals are constantly looking for ways to preserve value,” Jennifer Echenim, a Lagos-based front-end engineer working with technologies, told Al Jazeera. Web3. “However, the naira continues to devalue; as such, eNaira adoption looked like a failure before it even started.

“Seems to me like a follow-up to restrictions on other digital currencies […] No proper research was done before it was launched,” she said. “For a currency to be valued, there must be a demand; this is essentially what is driving digital currencies today (demand). No one is looking for Naira. It is not even acceptable or usable outside of Nigeria. Building a digital currency on it is definitely a failure.

In 2020, the naira was trading at 360 to the dollar on the black market, but on Friday the exchange rate was $1 for N600.

Cash is still king

During the launch, CBN Governor Godwin Emefiele said more than 2,000 customers had been onboarded.

In January 2021, it was announced that 95 days after launch, the eNaira app had been downloaded 694,000 times from 160 countries with over 35,000 transactions. Today, according to local media, there have been around 700,000 total downloads.

By comparison, just a month after El Salvador launched its own digital currency “Chivo”, three million people – almost half of the population – had downloaded it. “There are more Salvadorans with Bitcoin wallets than traditional bank accounts,” Forbes wrote in October 2021.

Additionally, the eNaira Speed ​​Wallet app is rated 2.2 out of 5 on the iOS App Store and 2.9 out of 5 on the Android Play Store. And there seems to be a lot more criticism than praise on the app page and in real life.

It took Oghenemarho Orukele, an engineer and researcher based in the south of France, almost three days to create an account after uploading in October 2021. The registration form asked for his bank verification number, then the application refused to let him continue with an e-mail address, he said.

When he finally got to step two of the process, the one-time password (OTP) he was supposed to receive via email arrived a few hours later. It took two days to get it fixed, after which Orukele said “everything went well”.

Eugene Adavore, a 22-year-old UI/UX designer, downloaded it to see if the design was user-friendly and to ensure “in the long run, if the product would meet the need for which it was designed”. He called it a “brilliant initiative”, but said it needed a major overhaul to succeed.

Many economists also believe that eNaira’s macroeconomic goal of a cashless society has yet to be achieved.

In January 2012, the CBN introduced a cashless policy to encourage electronic transactions and reduce the circulation of cash throughout the country. It was piloted in Lagos, the commercial capital, and implemented nationwide two years later.

But in many parts of Nigeria, cash is still king.

For Ese Osamwonyi, a senior analyst at Lagos-based socio-political risk consultancy SBM Intelligence, the non-compliance with the policy – like the slow adoption of eNaira – is proof that the government has not been sufficiently inclusive in its pursuit of a cashless economy.

He told Al Jazeera that Nigerians living below the poverty line transact daily with street vendors, motorbike taxi (okada) drivers and other cash-based retail businesses. For this large group, electronic payment channels are not a priority.

“Inclusion of these last mile retailer segments in the use of eNaira for day-to-day business transactions will drive adoption among low-income people/individuals in the poverty bracket,” Osamwonyi said.

In response, the CBN said they have created viable solutions for this demographic, including provisions to allow the use of other forms of identification (e.g. fingerprints) to access their eNaira wallet and USSD codes to those who do not have a smartphone.

“[The] CBN policy cannot be effective if the proportion of the informal sector is much larger than the formal sector,” Hassan Mahmud, the CBN’s monetary policy director, told Al Jazeera.

CBN says it works closely with telecom operators to ensure access to eNaira even when an individual is out of service. The goal, Mahmud said, is to improve monetary policy penetration by moving many sectors of the economy that are outside the banking system into it.

Years ago, the CBN established the Nigerian Incentive Based Risk Sharing Scheme for Agricultural Loans to promote agribusiness by giving rural capital to farmers. With eNaira, the CBN believes these funds can be moved more efficiently, knocking out intermediaries and curbing corruption.

But small and medium-sized businesses – which account for 96% of businesses in Nigeria and 84% of jobs in the country, according to PricewaterhouseCoopers – may not be able to benefit from eNaira due to lack of information about it.

Al Jazeera spoke to dozens of small business owners; most of them were hearing about eNaira for the first time, and many said they didn’t know a business owner was currently using it. Some have asked if and how this differs from conventional banking apps.

In Lagos, 29-year-old baker Zainab Yakura N’jie wants to adopt the app even though she hasn’t downloaded it yet. “The world as we know it is becoming very digital, so it will make it easier and faster to be able to make payments through your phone,” she told Al Jazeera.

To target people like N’jie, Osamwonyi says awareness is key.

“The government should raise awareness among stakeholders on the benefits of the cashless economy and share information on electronic channels and mode of payment available for entrepreneurs in the informal sector of the economy,” he said.

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