Friday, October 29, 2021

Nigeria’s eNaira digital currency had an embarrassing first week

It is not time for adieu yet, but Nigeria’s central bank digital currency—the first such attempt in Africa—has not gotten off to a great start.

The eNaira, as the digital currency is called, was initially scheduled to launch on Oct. 1 this year. That was postponed with the excuse that the launch clashed with independence day celebrations. Nigerians became suspicious of their central bank’s readiness for a digital currency rollout; after all, independence day is a fixed event every year and so authorities should have planned better.

Shrugging off sceptics, president Muhammadu Buhari unveiled the eNaira wallet at an indoor, socially-distanced ceremony in Abuja three weeks later (on Oct. 25,) where only three media houses were invited and no questions were taken, according to Reuters. Buhari said the innovation could grow Nigeria’s economy by $29 billion in the coming decade, and further financial inclusion goals.

But on just the fourth day, the eNaira was looking dead on arrival.

eNaira app hasn’t worked well

In designing the eNaira, Nigeria hoped to follow the emerging blueprint for central bank digital currencies, especially China’s.

The eNaira is supposed to live within a mobile wallet (pdf), have the same value and be interchangeable with the physical naira for everyday transactions. Nigerians believe the eNaira, which is governed by a centralized blockchain, is part of the central bank’s drive to discourage cryptocurrencies’ popularity among Nigeria’s youth, just like China’s effort with the digital yuan.

And so this week, Nigeria’s central bank made two types of eNaira wallets available on Google and Apple stores: one for individuals, and another for merchants. But some users say parts of the wallet for individuals have not worked properly.

Fisayo Fosudo, a Nigerian YouTuber who reviews gadgets and apps, said he and three friends initially got error messages that the eNaira app could not match their emails to their bank verification numbers. He would later register successfully but found broken links that did not lead to helpful support pages on the central bank’s website. “Was really looking forward to reviewing the eNaira app but it’s been hard to get it to work seamlessly. We wait,” Fosudo said.

After many users left poor reviews for the Android version of the eNaira app for individuals, it was taken down. It had been downloaded 100,000 times before that. The Apple Store version remained available at press time.

Nigeria’s central bank is pre-empting eNaira scams

Central bank digital currencies are not immune to scams. Last October, Chinese authorities started seeing fake digital yuan wallets, especially because the government had chosen to give away $6.2 million worth of digital yuan for free to citizens to encourage adoption.

Nigeria’s eNaira may be struggling to take off but the central bank is already warning of potential scams. In a press release on Oct. 27, the bank clarified that it did not have a dedicated eNaira account, and that it was not distributing 50 billion naira in eNaira.

What of the other CBDC plan in Africa?

South Africa is the other large economy in Africa contemplating a central bank digital currency, but it’s not quite through the same process as Nigeria’s.

Instead of a rollout to citizens for intra-country transactions, South Africa’s CBDC trial is part of a project by the Bank for International Settlements (BIS) which includes the central banks of Australia, Singapore, and Malaysia. They are teaming up to test the use of CBDCs for international settlements.

Project Dunbar, as it is called, will use CBDCs to create platforms for financial institutions to transact directly with each other using digital currencies issued by the central banks. The hope is to make transactions faster, cheaper, and without a need for intermediaries.

By Alexander Onukwue 


Related story: Video - Nigeria becomes first African nation to roll out digital currency

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