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I have read several publications on the subject of e-Naira, the central bank digital currency (CBDC) of Nigeria, and why the project seems dead on arrival. Although, these publications have some elements of truth in them but they are mostly from people who are not from Nigeria, and do not actually know what the average Nigerians feel about e-Naira.
As a Nigerian who has experienced in the use of digital currency, and one who has been affected by the Nigerian government financial policies on several occasions, I feel it is important to share my own take on why e-Naira failed, and to put out some facts that most people do not know about e-Naira.
Prelude to e-Naira creation
Before the creation of e-Naira, cryptocurrency adoption in Nigeria was glowing like wildfire especially among the youths. As a result, more and more local crypto exchanges were opening with little or no regulations. And, at the time, the Nigeria Naira was losing it value against the dollar rapidly.
The central bank of Nigeria believes that cryptocurrency traders were responsible for the high cost of dollar in the economy mostly in the black market, and thus decided to ban Banks in the country from dealing with cryptocurrency exchanges, or facilitating transaction involving crypto.
The ban on cryptocurrency exchanges in the country was a very big shock to many crypto enthusiasts in Nigeria. Banks were strictly warned to close their accounts with cryptocurrency exchanges and all crypto related businesses.
The development was a tough nut to crack for the local crypto exchanges in the country because the development literally closed their business and operation. Some exchanges who were ahead in the game quickly set up peer-to-peer trading system on their platform to enable them continue in business and help crypto traders received payment in Fiat.
The introduction of e-Naira
Although the peer-to-peer system was a success, most exchanges couldn't afford to set the system to meet up the demand of their customers. Therefore, these exchanges owners and representatives in the country sought for a way to regulate the industry with government involvement, and in turn the Central Bank of Nigeria, CBN, proposed the creation of e-Naira to be the dominant trading currency in those exchanges. Thus, e-Naira was born.
However, no exchanges ever listed e-Naira as trading pair on their platform, it has only been used as an entry and exit token since the time of its release.
Why e-Naira failed as central bank digital currency
First of all, it will be right to say that the creation of e-Naira fulfilled its purpose, which are to regulate crypto exchanges in the country, and make money for the government. Beside that, there are no other reasons for e-Naira creation even though the central bank of Nigeria have something else stated on their website.
There are two obvious reasons why e-Naira failed. Let's look at them one after the other.
The continues decline in value of the Nigeria Naira
At the time that e-Naira was released in April 2018, the Nigeria Naira was already losing value on the currency market. A lot of crypto enthusiasts that were interested in e-Naira before its release, suddenly switched to other digital stablecoins.
The reason for that is simple. You cannot hold a currency as a trading instrument that is losing value rapidly. Even though e-Naira had the advantage of being a currency that is less volatile than the local cryptocurrency, the value of the Naira is still the big factor when it comes to spending the currency.
Cryptocurrency traders prefer to hold their funds in USDT and other mainstream stablecoins because these currencies keep giving them value against the e-Naira that is pegged to the declining Naira value.
Nigerians are not yet ready for a digital currency economy
Nigeria as a country is not yet ready for a digital economy even though she boast to be the largest economy in Africa. This is because people in the country are not yet sure about how it works and they are not used to spend their money in digital form.
The recent cash scarcity occasioned by the Naira redesigned lend support to the above claim. One would assume that people would turn to e-Naira to help their businesses survive until physical currency become available as before but this didn't happen as expected.
Even bank apps and other Fintech apps were not considered to be useful by many during the cash crunch. People still choose to queue up at the banks with their ATM cards in search of cash. Moreover, most merchants and retailers were not ready to receive payment in digital form let alone e-Naira.
Ignorance in the use of digital wallet could be said to be responsible for merchants and retailers to refuse accepting payment for goods and services digitally. With this kind of attitude, e-Naira have no chance to make an impact in the Nigerian economy.
What the government is doing with e-Naira today
Outside being used in the local exchanges for deposit and withdrawal of Fiat, the Nigeria central bank is trying to push e-Naira to the masses by way of grants and loans. Currently, the central bank of Nigeria is running a funding program for farmers with e-Naira as the payment system.
This is a calculated attempt by the central bank to force people to download the e-Naira wallet and possibly continue to transact business from the same.
in conclusion, the failure of e-Naira was as a result of market and economic factors, but the economy in Nigeria is gradually becoming more and more digitalized. With digital money at the center of all businesses, cryptocurrency will soon be the best way to transact.
For now, there is no way e-Naira can catch up with other stablecoins but if the Nigerian central bank continues to push the use of the digital currency, more people with e-Naira wallets can be expected in the near future.