Home Blockchain Nigeria central bank partners local blockchain company to drive eNaira take-up

Nigeria central bank partners local blockchain company to drive eNaira take-up

Nigeria: its central bank looking to boost digital payments as it pushes towards a cashless society | Credit: David Iloba (Pexels) & a Global Government Fintech article from 25 October 2021

Nigeria’s central bank has appointed a blockchain company based in capital city Abuja to ‘champion the adoption and utility’ of central bank digital currency (CBDC) across the country.

Convexity Technologies has been tasked with helping the Central Bank of Nigeria (CBN) to ‘deepen adoptions and sensitisation’ to the eNaira, according to a LinkedIn post by the company.

Nigeria, which is Africa’s most populous country with a population of about 211 million people, debuted the eNaira 18 months ago. It has been working alongside Barbados-based fintech company Bitt as technical partner.

The CBDC’s rollout and promotion is part of a broader – and increasingly controversial – strategy to discourage use of traditional (paper) cash.

‘The CBN in line with [its] mandate to push for a cashless economy and strengthen the naira has decided to partner with Convexity Technologies Ltd, a turnkey blockchain solution and consultancy company with deep reach in the blockchain and cryptocurrency space in Nigeria and Africa, to champion the adoption and utility of the e-Naira across Nigeria,’ the company states in its announcement.

‘We are glad to have this strategic partnership with the Apex [central] bank and the monetary policy maker of Nigeria,’ Convexity adds. ‘This will boost the weakened confidence between the private sector who are champions of the Nigerian economy and FX [foreign exchange] drivers and the Central Bank of Nigeria.’

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Systemic and human difficulties’

A policy to redesign the naira (existing paper currency), involving the withdrawal from circulation of old notes, has caused political and societal tensions in recent months.

On 16 February president Muhammadu Buhari was described (in a BBC report) as seeking to ‘calm tensions over a lack of cash’ by announcing extended deadlines for the withdrawal of old notes amid protests at banks and ATMs over shortages of newly issued notes.

Buhari broadcast an address to the nation, where 55 cent of adults do not have a bank account (according to the World Bank’s Global Findex Database 2021), to acknowledge “systemic and human difficulties encountered during implementation and in response to the appeal of all citizens” (see Twitter-embedded video-clip ‘2’, below):

Cash scarcity: Muhammadu Buhari broadcasts to the nation | Source: Twitter

A presidential election was held in Nigeria on 25 February, with Bola Tinubu declared the winner.

CBDC adoption ‘rather slow’: IMF

CBN governor Godwin Emefiele set out the central bank’s ambitions for the CBDC in a speech at an eNaira-focused hackathon held in capital city Abuja on 18 August 2022. The central bank was, he said, aiming to achieve eight million active eNaira users through the next stage of a promotional push that would focus on using the digital currency to increase financial inclusion. At the time about 270,000 digital wallets were considered ‘active’ for the eNaira.

An International Monetary Fund (IMF) Nigeria country report published less than a month ago (16 February 2023) described eNaira adoption by households and merchants as ‘rather slow’.

‘After a strong initial uptake, wallet downloads have slowed, reaching 0.8 per cent of bank accounts, and merchant wallet downloads amount to about 10 per cent of merchants with point-of-sale terminals,’ the IMF report stated, describing wallet activity as ‘low, with most wallets appearing inactive’.

Expanding access to the eNaira from people with bank accounts to those without a bank account but with a mobile phone would help, the IMF report added.

Emefiele said last August that the eNaira’s first phase had focused on those with bank accounts and that the second phase ‘intended to drive financial inclusion by onboarding the unbanked and underserved users, leveraging offline channels’. He added (at the time): ‘Hence greater success is envisioned for the project, with phase two expected to deliver more gains, with the target of eight million active users based on estimations using the “diffusion of innovation” model.’ Diffusion of innovation theory seeks to explain the adoption of new ideas and technologies.

The central bank governor has listed the benefits of launching a state-backed digital currency as including helping with poverty reduction; cheaper and faster remittance inflows; enabling direct welfare disbursements to citizens; and improving the efficiency of payment systems and cross-border payments.

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AfriGo card scheme launched

Other recent developments in the country include the launch of AfriGo, described by the CBN as the ‘first central bank-led domestic scheme card scheme in Africa’ and a ‘significant move to strengthen the national payments system and deepen the usage of electronic platforms in Nigeria’.

Emefiele formally unveiled AfriGo, which is being run in collaboration with the Nigeria Inter-Bank Settlement System (NIBSS) and is intended to compete with global cards such as Mastercard and Visa, in a ‘virtual’ ceremony on 26 January.

“The scheme is important to plug in the gap that has remained in the economy since the introduction of the cashless policy, and will integrate the informal segment of our economy, reduce shadow banking, bring more Nigerians into the formal financial services with an attendant diversification of deposit portfolio which will further strengthen the stability of the banking industry,” he said.

CBN deputy governor (financial system stability) Aishah Ahmad (who is also chairperson of NIBSS) said the scheme would lead to the sovereignty of data, save cost on card transactions, reduce foreign exchange pressure and present new opportunities for the Nigerian economy.

*** In a further fintech-related development, operational guidelines for open banking in Nigeria have been published by the CBN (on 7 March). A 68-page circular, signed off by payment systems management department director Musa Jimoh, establishes principles for data-sharing across the banking and payments system to ‘promote innovations and broaden the range of financial products and services available to bank customers’.

FURTHER READING

All or nothing? Central bank digital currencies’ financial inclusion challenge – write-up of a Global Government Fintech webinar (on 7 February 2023) featuring panellists from the Bahamas, Eastern Caribbean and Canada

Nigerian central bank reveals CBDC progress as it turns focus to financial inclusion – news story (25 August 2022) on Godwin Emefiele’s speech at the eNaira hackathon 

Global surge in digital payments aids financial inclusion: World Bank’s Findex – news story (30 June 2022) on ‘The Global Findex Database 2021: Financial Inclusion, Digital Payments and Resilience in the Age of Covid-19’ report

Nigeria becomes first country in Africa to launch CBDC – news story (25 October 2021) on the eNaira going live

Nigeria names digital currency partner as it prepares for eNaira – news story (3 September 2021) on the CBN inking a contract with Bitt