The Central Bank of Nigeria introduced the eNaira, a Central Bank Digital Currency (CBDC), in 2021 and has since provided updates on its advantages, potential risks, and strategies to enhance eNaira adoption.
In a recently published document, the CBN emphasized that one primary motive for developing countries to explore CBDCs is to enhance financial inclusion, particularly in nations with significant unbanked populations.
Furthermore, the CBN proposed one approach to boost financial inclusion: introducing an interest component to eNaira deposits. The CBN stated, ‘eNaira deposits should offer interest to attract unbanked savers.
CBN believes that this move will motivate the unbanked savers to participate in the formal financial system. The Financial institution added that the unbanked savers would do so because they “trust the central bank.”
While this could onboard the unbanked, it also has the potential to lead to disorderly bank disintermediation. However, to mitigate this risk, the CBN suggested that ‘the interest earned on eNaira deposits should be lower than that offered on bank deposits.’
To achieve a financial inclusion revolution to happen through the eNaira there must be an increasing adoption of the digital currency. According to CBN, aside from the wallet downloads of the eNaira wallet, “since the launch of the eNaira USSD in August 2022, 15,997 users have been onboarded, with total volume and value of transactions of 11,464 and N2.74 million as of October 3, 2022.”
The institution is of the opinion that widespread adoption of the eNaira should be given enough time. This time will allow citizens and businesses to see the benefits of the eNaira and participate from an informed perspective that engages because they are compelled to adopt it.
“People should be allowed to compare the benefits of the eNaira with the benefits of other payment alternatives.” This will encourage them to choose the eNaira if it offers superior benefits,” CBN said.
Other effective ways suggested by the CBN to increase financial inclusion through the eNaira is through education, allowing eNaira to coexist with the physical cash, making it accepted in the informal economy in Nigeria, and avoiding disrupting the financial and banking system.
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