On 25 October, the Central Bank of Nigeria issued the eNaira, Africa’s first digital currency.
The continent’s most populous country has now joined six Caribbean nations that previously have welcomed electronic currencies.
In the currency’s first 10 days in circulation, more than 400,000 people created digital wallets to accept the eNaira, the bank reported.
The digital money will reduce transaction costs, speed and simplify cross-border transactions, including remittances arriving from Nigerians abroad, and bring more people into the financial system, the bank hopes.
About half of Nigerians lack a bank account, 95 percent of the country’s transactions are done in cash, and the informal economy makes up half of Nigeria’s GDP, according to the Financial Times.
At the same time, Nigeria is known as Africa’s hub of financial technology, attracting billions of dollars in investment in recent years, moving critics to wonder if the eNaira has a short-term future.
“All of this can already be adequately addressed using the existing financial payment system,” Adedayo Ademuwagun, a Songhai Advisory analyst, told the FT.
“Nigeria is the fintech capital of Africa, so there are already so many options, so many ways to pay somebody, and pay them fast,” he said.
Also, with the eNaira, “the government knows every transaction you carry out, and in a place like Nigeria, where there’s already mistrust between ordinary Nigerians and the government, there may be skepticism in terms of adoption,” analyst Ronak Gadhia at EFG-Hermes investment bank noted in an FT interview.
“The eNaira actually makes it easier if the government wants to shut down someone’s account or even the whole system,” he said.
On 5 February, the central bank forbade financial institutions from dealing with local crypto exchanges and ordered banks to shut down traders’ accounts, claiming that crypto jeopardized the country’s financial system and could be used to finance terror plots.
Crypto was used to back 2020 protests against the government’s Special Anti-Robbery Squad, which has been accused of atrocities and routine harassment against citizens.
Despite the ban, crypto is flourishing in Nigeria as people use it to skirt capital controls, earn an income in a country where unemployment is rampant, and protect value as the naira, Nigeria’s paper currency, loses value.
The eNaira is intended to bring more stability to the economy, government-watchers told the FT.