Central Bank of Nigeria partners with blockchain company to drive adoption of eNaira

The Central Bank of Nigeria has partnered with a local blockchain company to integrate credit technology into eNaira, sparking central bank digital currency (CBDC) adoption.

eNaira was launched in October 2021 as Africa’s first CBDC and the world’s second CBDC after the Bahamas’ Sand Dollar. Although it was launched with much fanfare and high expectations, it failed to attract users due to mistrust of central bank funds, lack of infrastructure, and poor execution by central banks.

The partnership with local company Gluwa is the latest effort by the Central Bank of Nigeria (CBN) to push digital currencies.

According to an announcement shared with local media, the CBN signed a memorandum of understanding (MOU) with Gluwa to “strengthen eNaira’s technological capabilities.”

Gluwa will leverage Credal, a credit rating technology built on a custom blockchain, to build a “credit reputation” for unbanked Nigerians. The integration will streamline “loan origination, management, settlement and credit assessment processes for local fintech lenders.”

The CBN believes this will promote financial inclusion in Nigeria and enable the unbanked to demonstrate their creditworthiness and obtain loans from financial institutions.

“We are very excited to share monumental news! “After years of tireless efforts, Gluwa has officially come on board as a Partner Agent and signed a Memorandum of Understanding with the Central Bank of Nigeria to drive increased CBDC adoption in Nigeria,” the startup said.

“The core goal of the partnership is to leverage the power of blockchain technology to strengthen financial inclusion, improve eNaira functionality and drive financial innovation.”

According to a 2023 International Monetary Fund (IMF) report, eNaira has yet to reach 1% of Nigerians. According to the IMF, only 1.5% of existing wallets are active each week.

Nigeria is highly dependent on cash, and economists estimate that the country’s informal economy is worth $220 billion. This comes with its challenges. In particular, the lack of consumer credit history is a problem that prevents millions of people from developing their businesses through credit facilities.

eNaira was envisioned as the ultimate solution, but it failed to live up to expectations. The biggest indictment is that the CBN’s redesign of the naira note last year left it unable to attract users due to a severe cash shortage. Despite the country’s cash shortage leaving millions waiting in line for hours at ATMs, digital currencies have not emerged as the best alternative. However, there was a temporary surge in usage.

Other efforts by the CBN to drive adoption, including cutting merchant service fees and introducing USSD options, also failed.

In response to the sluggish adoption of eNaira, commercial banking in Nigeria is making strides.
It is a stablecoin to facilitate digital payments. Under the African Stablecoin Consortium, the bank collaborated with local fintech companies to develop the cNGN stablecoin. cNGN is available on several public blockchains and is reportedly scheduled to be listed on exchanges.

eNaira’s struggles stand in stark contrast to Nigeria’s rapid adoption of digital currencies. The West African country ranks first in Africa in digital asset trading and second globally in P2P trading volume, behind the United States. According to Chainalytics, the country ranks second globally in overall adoption, behind India.

To learn more about central bank digital currencies and some of the design decisions to consider when creating and launching them, read nChain’s CBDC Playbook.

Watch: BSV Stories Episode 10 – The Future Has Already Arrived in Nigeria

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