Last week, the Central Bank of Nigeria announced the introduction of the eNaira as a payment option for inbound remittances in an effort to help increase the adoption of the central bank digital currency (CBDC). The move comes after the ousting of the central bank’s Governor earlier this month, which cast doubts over the future of the CBDC initiative.
The eNaira’s potential for cross-border remittances
“The Central Bank of Nigeria (CBN), in its efforts to liberalize the payout of diaspora remittances and promote the adoption of the eNaira, hereby announces the introduction of the eNaira as a payment option to recipients of diaspora remittance,” the communication read.
Nonetheless, the central bank has noted that this option remains entirely voluntary and that the eNaira will continue to run alongside the existing dollar payout system.
Given Nigeria has an ongoing dollar shortage, the central bank might want to see whether this can help by reducing demand for dollars. If a large proportion of remittances switched to eNaira it would have an impact because last year inbound remittances reached $20 billion.
International money transfer operators (IMTOs) will need to apply for a one-time “no-objection” and open Merchant Wallets through the central bank to offer customers the possibility of using the eNaira for cross-border remittances.
Notably, the central bank seems to have heeded the IMF’s recent advice. Last month, a report had noted the CBDC’s “disappointingly low” adoption rate and suggested various measures to encourage its use, including cross-border remittances.
The future of Nigeria’s CBDC
The news came out just two weeks after the suspension of Godwin Emefiele, Nigeria’s former unorthodox central bank Governor. Mr Emefiele had been one of the major supporters of the CBDC initiative, so many wondered about the future of the eNaira following his departure.
But the fact that the central bank is expanding the eNaira’s use cases suggests that the new President has not given up on the CBDC. Transactions temporarily surged this year and could do so again with this new measure.