Tallinn, Estonia, June 9, 2023 – Nigeria has recently launched its in-house central bank digital currency (CBDC), the eNaira, and it is already gaining increased adoption as national fiat reserves face severe shortages. Reports indicate that the cash shortage in the country is due to the central bank’s decision to replace older banknotes with more prominent denominations during rising inflation, causing an acute cash shortage in Nigeria.
While developing countries were among the first to recognise the importance of a CBDC in revamping fiat capabilities, the idea is yet to materialise. An expert report from Bitcode Decode Official stated that the shortage of physical cash forced Nigerians to use the eNaira. In Nigeria, cash accounts for about 90% of transactions, and the value of eNaira transactions increased 63% to 22 billion naira ($47.7 million).
The progress of CBDCs in Nigeria
According to the Governor of the Central Bank of Nigeria, Godwin Emefiele, the total number of CBDC wallets developed more than 12 times related to October 2022 is currently at 13 million. The demonetisation reduced the circulating cash supply from 3.2 trillion nairas to 1 trillion. Nigeria minted over 10 billion eNairas to compensate for this decline. Moreover, eNaira payouts in social schemes and government initiatives also contribute to the increase in CBDC’s adoption.
CBDCs are said to present a way to overcome challenges for developing countries presented by the fiat economy, which includes strengthening anti-money laundering initiatives and reducing operating costs. Emefiele noted, “The eNaira has emerged as the electronic payment channel of choice for financial inclusion and executing social interventions.”
Plans for revamp
On February 21, 2023, the Central Bank of Nigeria turned to a New York tech firm to assist in revamping the underlying technology after various attempts to create an efficient digital currency. According to reports, the Central Bank of Nigeria intends to develop a new and improved system to manage the eNaira, and the software for the eNaira will be designed to allow the Central Bank of Nigeria to have complete control over the initiative. In 2021, the effort to create the eNaira started with assistance from the financial software company, Bitt. The new partner will not immediately take Bitt’s role but will help phase in total control for the Nigerian central bank. In a statement, Bitt noted that it is aware that the CBN works with various partners for its technological innovations. It confirmed that it still works closely with the CBN and is developing additional features and enhancements.
During the cash crunch, Nigerians had another option for procuring cryptocurrencies. On March 21, 2023, MetaMask’s parent company ConsenSys published a new integration with crypto fintech MoonPay, allowing customers in Nigeria to acquire crypto through instant bank transfers. The new feature is accessible within the MetaMask mobile and Portfolio DApp, significantly simplifying the process of buying crypto without using credit or debit cards in Nigeria.
MetaMask customers in Nigeria had access to the MetaMask wallet, but buying crypto was costly and time-consuming before the partnership. The Product Manager at MetaMask, Lorenzo Santos, said, “While Moonpay had a card integration feature, about 90% of attempts to buy crypto with a credit or debit card were declined.” Santos added, “The new integration supporting local bank transfers, crypto purchases on MetaMask are now faster and cheaper, allowing users to access crypto without sending assets from a centralised exchange.”
Chief Product and Strategy Officer at MoonPay, Zeeshan Feroz, said, “The integration is estimated to reduce the decline rate for direct crypto purchases in Nigeria from 90% to 30%. He noted, “That customers of all banks in Nigeria would have access to the service through bank transfers, which is a widely used payment method across Nigerian e-commerce businesses.”
The Product Manager at MetaMask added, “Despite the current issues with crypto on-ramps in Nigeria, the country has emerged as a major market for MetaMask, ranking third in mobile monthly active users. It is also among the top ten countries regarding visitors to metamask.io over the last month.”
Adoption of Crypto in Nigeria
According to the Chainalysis 2022 Global Crypto Adoption Index, Nigeria is one of the world’s top 20 ranked countries in cryptocurrency adoption. Some reports suggest that in 2022, 35% of Nigeria’s population aged 18 to 60 owned or traded cryptocurrencies. Even though in February 2021, the Central Bank of Nigeria banned banks from servicing crypto exchanges.
On December 19 2022, the Nigerian government announced that it would soon pass a law that will recognise the usage of Bitcoin and other cryptocurrencies as a process to keep up to date with global practices.
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