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 form of a working paper assessing its first year of performance. “Laudable,” said IMF researchers regarding the eNaira's debut year, but there were a few suggestions too.

The eNaira was the world’s second 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 initial adopters. The Central Bank of Nigeria introduced a phased introduction, which put off two of the CBDC’s biggest goals, extending financial inclusion to the unbanked and facilitating remittances, according to IMF officials. 

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Only about 1.5% of wallets are active on any week, and there were only a total of 802,000 transactions during the timespan examined. The figures represent less than one per wallet, and less than 1% of 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 the eNaira’s relationship to that network is a key question raised in the paper. The CBDC could compete with the MMOs on the retail market or facilitate MMOs’ operations by providing a bridge between them. The paper 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, IMF says the eNaira is unable to accommodate remittances directly, but mentioned this could be overcome either by allowing international money transfer operators to receive eNaira wallets or through intermediation. Researchers 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 recommends a few steps for boosting eNaira usage, such as using it for social payments in conjunction with MMOs that improve the social cash transfer system and increase adoption. Merchants could also be incentivized to use the eNaira. The Central Bank of Nigeria has started to work on inclusivity through the eNaira, the paper notes, but remittances remain problematic.

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