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CBN Defends eNaira Amid Low Adoption, Usage

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CBN Defends eNaira Amid Low Adoption, Usage

The Central Bank of Nigeria (CBN) has debunked the notion that it digital currency, eNaira, constitutes threats to the financial stability of the country.

CBN’s spokesman, Isa Abudulmumin, made this clarification on Monday as a response to reports in some media stating otherwise, which he however dismissed as misconstruing extract of the Foreword, and some articles, in the bank’s recently-released Economics of Digital Currencies: A Book of Readings.

Abdulmumin explained that a recurring theme in the book was the interest of regulators, such as the CBN, in the role of cryptocurrencies as speculative investments, and the potential threat they harbour for financial stability.

The statement read: “The attention of the Central Bank of Nigeria (CBN) has been drawn to news items on some media platforms — traditional and social — suggesting that the country’s Central Bank Digital Currency (CBDC), the eNaira, is a threat to the nation’s financial stability.

“After reviewing the reports, which appear to have been syndicated, there seems to be a lack of understanding of portions of the Foreword, and some articles, in the bank’s recently released Economics of Digital Currencies: A Book of Readings.

“A recurring theme in the book is the interest of regulators, such as the CBN, in the role of cryptocurrencies as speculative investments, and the potential threat they harbour for financial stability.

“Pursuant to that, the articles in the book provide an in-depth understanding of CBDCs generally and the workings of the eNaira in particular, highlighting issues and challenges in implementation and adoption.

“One of the media reports speaks of “concerns about Nigeria’s central bank digital currency, eNaira, indicating potential risks to financial stability despite its success in narrowing the country’s financial inclusion gap.”

“The nexus implied is unconvincing. In the ordinary course of things, the CBN does not join issues on news commentary; however, we are constrained to clarify the reports to ensure that misunderstandings are not fostered.”

He added that the eNaira structure continues to evolve and undergo modifications targeted at improving the user experience across all interfaces.

“We encourage Nigerians to embrace the technology for, amongst other things, greater financial inclusion,” Abdulmumin concluded.

Adoption, Usage Remain Low

Recall that CBN had floated eNaira project after it banned cryptocurrency-related transactions in the country while claiming that digital currency was used for money laundering and terrorism, and could trigger financial instability.

However, the country’s Central Bank Digital Currency (CBDC), eNaira, designed to fill the gap and provide digital currency alternative for Nigerians has so far received low patronage while Nigeria continues to be among top countries where cryptocurrency transactions thrive.

New York-based blockchain research firm Chainalysis said in its latest report that Nigeria’s volume of crypto transactions grew 9% year-over-year to $56.7 billion between July 2022 and June 2023.

On the contrary, a working paper released by the International Monetary Fund (IMF) as of June revealed that the eNaira’s adoption was disappointingly low two years after its launch.

eNaira was lunched on October 25, 2021 by former President Muhammadu Buhari and dismissed Godwin Emefiele as the Governor of CBN.

According to the IMF, less than 1% (0.8) of Nigeria’s active bank accounts, accounted for the total retail eNaira wallets.

It stated that only 1.5% of the downloaded wallets was used weekly, indicating that about 98.5% are abandoned and unused.

The institution added that the average value of eNaira transactions had been N923 million per week, with the average value per one transaction around N60,000.

Regardless, the CBN had reiterated that the eNaira is meant to improve monetary policy effectiveness, aid financial inclusion, improve revenue and tax collection, improve payment efficiency, and enhance the government’s targeted social interventions.

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