Why the Nigerian CBDC eNaira Failed, and What We Learned From It

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By Gerelyn
Estimated reading: 7mins

The eNaira, digital money denominated in the Nigerian Naira, is officially a failure. 

Make no mistake — the eNaira is still in circulation in the Nigerian economy – but most would agree, it looks to be a colossal disaster.

 In this article, we will explain why.

What is the eNaira? 

The eNaira is the name given to the official central bank digital currency (CBDC) of Nigeria. The central issuer of this token is the Central Bank of Nigeria (CBN) and it is supposedly backed 1:1 with the fiat currency Naira.  

On the surface, the eNaira appears to be the government's attempt to embrace a global financial and technological innovation to improve economic efficiency and equity for its people. 

In reality, the eNaira appears to be the Nigerian government’s attempt to surveil its citizens’ spending habits and expand its control over them. 

If there was any hope towards its organic adoption, they were erased when Nigerian officials decided to cap naira ATM withdrawals among citizens to push a cashless society centered on the eNaira. 

Once the government resorts to such tactics, their end game can no longer be denied. 

The Nigerian government did its best to play it cool, comparing the use cases of a CBDC to leading cryptocurrency Bitcoin — as a medium of exchange, and as a store of value. 

They also touted the eNaira as the alternative to cash for retail transactions, attempting to take ownership of features such as speed, security, ease of use, and cheap transactions — all of which are inherent with cryptocurrencies and the blockchain.  

However, the eNaira has fallen flat, and the writing was on the wall. 

How Does the eNaira Work?

The eNaira is built to be the digital equivalent of the cash naira and supposedly can be exchanged on a 1:1 basis. 

Unlike the cash version of the naira, however, the eNaira runs on distributed ledger technology (DLT), more specifically the Hyperledger Fabric variant of DLT.

Hyperledger Fabric is an open-source enterprise-grade permissioned distributed ledger technology (DLT) platform. 

However, Nigerians are not too quick to trust the government’s claim that transferring the eNaira would be as simple as it seems. 

Reuters spotlighted one Nigerian who is steering clear of the eNaira because the government did not specify how the CBDC could be converted back into the cash naira, not to mention whether it would be transferable with other cryptocurrencies.

 According to the CBN, the eNaira could be accessed in the following ways: 

  • via the phone app 
  • internet banking 
  • a code dialed from mobile phones

Nigeria relies on an account-based CBDC model, which involves an identity system including a know-your-customer (KYC) framework to “enable access for all Nigerians,” according to the eNaira Design Paper. 

This differs from a token-based system, in which the thing that needs verifying is the “validity of the object used to pay,” not the identity of the payer, as explained by the Federal Reserve Bank of New York. 

By way of comparison, Bitcoin has been grouped into both account-based and token-based systems. 

In this case, the account represents the Bitcoin address while the private key acts as proof of identity. 

The private key is what matters. For Bitcoin transactions, “it is not relevant whether the system requires users to reveal their true identity,” the NY Fed paper states. 

Why the eNaira is Failing

Nigerians have embraced cryptocurrencies but they have shunned the eNaira. 

According to blockchain analyst firm Chainalysis, Nigeria is the leading African nation for cryptocurrency adoption, and just misses the top-10 global list by a hair. 

However, Nigerians have been avoiding the eNaira like the plague.  

Nigeria, Africa’s largest economy, is not the first country to develop a CBDC.

The African nation is following in the footsteps of the likes of China (e-CNY) and the Bahamas (Sand Dollar), among others. 

However, the eNaira is a flop because it has failed to gain traction among the Nigerian population of 211 million, despite being used for a combined $9.3 million in transactions as of August 2022.  

Geopolitical analyst Nick Giambruno characterized the eNaira as a “massive failure,” saying that “it’s not what the elites hoped for.”

The eNaira launched on October 25, 2021, and the numbers don’t lie.

As of October 2022, a mere one in 200 Nigerians — less than 0.5% — are actually transacting in the country’s CBDC.

In addition to mistrust, part of the problem has been confusion. 

The Nigerian government has pushed back against cryptocurrencies, and many Nigerians reportedly can’t tell the difference between the eNaira and cryptocurrencies like Bitcoin. 

Nigeria was targeting an adoption rate of 8 million users in Phase II of its multi-phase rollout of the eNaira. 

They have a long way to go. 

The eNaira had a mere 840,000 downloads across 270,000 digital wallets as of August 2022 compared to the government’s goal to onboard 8 million users

What is the eNaira Price?

In addition to privacy concerns, Nigerians are probably saying no to the eNaira because value has been plummeting for its entire existence. 

The naira weakened 4.5% vs. the U.S. dollar in 2022, and this year isn’t looking much better. 

Nigeria is expected to devalue its currency in the first half of 2023 by the widest margin in over half-a-decade in an attempt to align the currency with market expectations, according to Bloomberg citing a survey.

Needless to say, this is not good news for the eNaira coin, which is tied 1:1 to the Nigerian naira.  

Nigeria Forcing CBDC Usage


Once Nigerian officials realized their hopes of phasing out the cash naira and pushing the eNaira had gone up in smoke, they seemingly stepped into panic mode. 

They started by trying to essentially bribe Nigerians, with the CBN offering a 5% discount to tri-cycles operators and their customers if they opted to transact in the eNaira. 

Apparently, the idea didn’t go over too well. So the CBN went into combat mode. 

In December 2022, Nigeria’s central bank reportedly slashed the amount that customers and businesses could withdraw from ATMS to 20,000 naira, or about $45 per day in an attempt to strongarm locals into using the CBDC. 

The previous daily limit on ATM withdrawals was 150,000 naira.

Meanwhile, weekly cash withdrawals are now capped at 100,000 naira and 500,000 naira for individuals and businesses, respectively. 

If Nigerians dare to break the rule, they will be charged fees of 5% (consumers) and 10% (corporations). 

The ironic part is that in its design paper for the eNaira, the CBN claims: 

“eNaira should be able to coexist with different forms of money already in use. A CBDC along with existing forms of money such as cash, reserves and settlement accounts should complement each other and coexist.” 

Somebody might want to remind them. 

Bottom Line

Nigerians have embraced cryptocurrencies like Bitcoin. That is why their reluctance to roll out the welcome mat for the eNaira CBDC is so telling. Tech-savvy Nigerians are not having it and will probably continue stacking sats instead. 

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Disclaimer:Please note that nothing on this website constitutes financial advice. Whilst every effort has been made to ensure that the information provided on this website is accurate, individuals must not rely on this information to make a financial or investment decision. Before making any decision, we strongly recommend you consult a qualified professional who should take into account your specific investment objectives, financial situation and individual needs.

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Gerelyn is a financial journalist who has been covering Wall Street for more than 20 years. After reporting for some of the top trade publications on investment banking, infrastructure and retirement, she was drawn to decentralization and shifted her coverage to the blockchain and cryptocurrency space in mid-2017. Since then, she has contributed to several major Bitcoin, Blockchain, and DeFi news sites, and has also written a children’s book.

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