Nigeria revisits its payments landscape amid sluggish eNaira adoption


The Nigerian central bank has outlined key focus areas for its national payments system in a two-year roadmap leading up to 2025.

Nigeria’s central bank will explore the potential of stablecoins, the adoption of blockchain technology to power a central bank digital currency (CBDC) and regulatory considerations related to initial coin offerings (ICOs) over the next two years.

These are the key takeaways of a policy document titled Nigeria Payments System Vision 2025, published by the Central Bank of Nigeria (CBN). The 83-page document touches on a variety of implications for its existing payments landscape, with blockchain-based systems coming to the fore.

The document delves into the implications of blockchain-based CBDCs, outlining 11 potential advantages of such an offering, including cash cost management, combating counterfeit currency, clear audibility, logistical improvements and payment efficiency.

Nigeria’s central bank believes monetary policy can be improved by the monitoring and adjustability of a CBDC, allowing for better control over the currency’s value. The Bank also notes that it could better monitor and control tax evasion, money laundering and other illegal activities through a CBDC.

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Lastly, the CBN touts improved financial inclusion and economic development, spurring innovation and efficiency by boosting competition between existing financial institutions’ retail payments products. A three to five-year time frame is achievable to roll out a CBDC solution in Nigeria, they said.

Stablecoins are also on the radar in Nigeria as fiat-backed digital currencies gain popularity in different countries worldwide. The CBN cites a need to develop a regulatory framework to implement stablecoin offerings in Nigeria.

Related: Nigerians’ passion for crypto is stopping short at the eNaira

The CBN has a cautious view of ICOs, highlighting “little appetite” to adopt existing ICOs given their “lack of regulation.” Despite this, the CBN identifies the role of ICOs as an asset class and sees potential in adopting ICOs as a novel approach to fundraising for capital projects, peer-to-peer lending and crowdfunding.

Smart contract functionality is another point of interest highlighted in the policy document. The CBN mentions the “tangible benefits” of linking settlement to the transfer of ownership through smart contracts and the transfer of ownership of financial securities or completing commercial trade transactions.

The country has been piloting its CBDC, the eNaira, since October 2021, but the project has struggled to gain traction among citizens. A Bloomberg report in October 2022 said the usage of eNaira is at just 0.5% of the country’s population. Meanwhile, Nigerians are becoming increasingly interested in cryptocurrencies, with Google search data in mid-2022 highlighting the appetite for crypto in the country. 

Cointelegraph reached out to Adesoji Solanke, fintech and banks director at Renaissance Capital, to unpack the appetite for cryptocurrency trading in Nigeria and the reported lack of adoption of the government-issued eNaira.

Solanke shared the same sentiments, highlighting that Nigerians have not shown much interest in the eNaira, despite local banks marketing it to their customers.

“There’s been no mass adoption of the eNaira in the country just yet on the consumer or merchant sides of the payments equation.”

Solanke said that the growing adoption of cryptocurrencies is driven by their cross-border functionality and the capital gain speculative option they provide. Weighing up whether the eNaira could become ubiquitous in Nigeria is a more complex consideration, according to Solanke.

Firstly more consumers would need to download and fund the wallet. The eNaira wallet should provide multiple and superior use cases that appeal to customers, merchants and other participants in the financial system. Merchants need a payment solution connected to the eNaira and powered by contactless devices that can read the wallet via smartphones, QR codes, or USSD codes.

Solanke also believes that there needs to be more explicit incentives for each sector to adopt eNaira. Incentives such as zero or low peer-to-peer or merchant transaction fees and functionality that transcends immediate financial services could boost adoption.

Stablecoins are another complex topic given the potential risk of their increased use “weakening the efficacy of monetary policy,” Solanke said. It’s one reason CBDCs could be a major theme in economic evolution in the medium term and why central banks may look to create regulatory clarity for stablecoins.

The potential adoption and regulation of ICOs would also require the CBN and the Nigerian Securities and Exchange Commission to work together, given that they would potentially be treated as securities or a new asset class.

Nigeria’s Central Bank took a stern stance toward the cryptocurrency sector in 2021, effectively banning local banks from servicing cryptocurrency exchanges. Some 18 months later, rumblings of a policy reversal were reported by local media in the form of a potential amendment to existing laws that would recognize cryptocurrency as capital for investment.

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