Today Bloomberg reported that the Central Bank of Nigeria (CBN) has approached new potential suppliers for its central bank digital currency (CBDC) project, the eNaira, which launched in October 2021. Bloomberg cited un-named sources saying the central bank wanted to control its own technology, a point the central bank has previously made. Enterprise blockchain firm R3 was one of the firms said to be in discussions with the CBN.
The central bank is currently working with Bitt which is also involved in other CBDC projects, including for the Eastern Caribbean.
So far, the take up of Nigeria’s CBDC can be described as lukewarm at best. Last week the International Monetary Fund (IMF) described the adoption of the eNaira as ‘rather slow’. By the end of November 2022, the number of wallets was less than a million, which represents under one percent of bank account holders. Ten percent of merchants with point-of-sale terminals support the CBDC. However, even those with wallets are mostly inactive.
This slow takeup is despite a young population. Nigeria has a population of 211 million, of whom more than 62% are aged 24 or less.
Given one of the goals of the CBDC is financial inclusion, the IMF suggested that the CBDC be integrated with existing mobile payment solutions and that the eNaira is used to deliver social assistance. The first iteration of the CBDC targeted bank account holders and smartphone apps, despite the financial inclusion goal. In the middle of last year, the central bank said it was working on extending the service to feature phones.
Apart from financial inclusion, another key goal is to reduce the cost of remittances. Small transfers to and from Nigeria cost more than 10% on average, with almost half the cost for foreign exchange. Support of remittances could be a key driver for eNaira adoption.
There are dozens of CBDC technology suppliers, but a handful has emerged in multiple research projects. For retail or consumer-facing CBDCs such as the eNaira, the suppliers that have won multiple pitches and competitions include Bitt, ConsenSys, G+D, IDEMIA and Soramitsu.
Soramitsu is an interesting example because it is involved in multiple projects in SouthEast Asia. One of the advantages is the potential future technological compatibility which might help with remittances. Another is some of the countries have similar goals for their CBDC because of economic similarities, such as dollarized economies.