A pariah digital currency is looking for street cred in Nigeria

A pariah digital currency is looking for street cred in Nigeria

A year after launching Africa’s first digital currency, Nigeria’s central bank is turning to three-wheeler taxi operators in the country.

A year after launching Africa’s first digital currency, Nigeria’s central bank is turning to the country’s three-wheeler taxi operators to accelerate the adoption of eNaira, as regulators around the world screen its every move.

It’s offering a 5% discount to drivers and passengers on auto rickshaws – known locally as Keke Napep – who use eNaira. It is the latest attempt to launch a digital currency, which has so far attracted only 1 in 200 people in the continent’s most populous country.

The central bank’s focus on digital currency is causing confusion among many Nigerians, who fail to see the difference between government-backed eNaira and cryptocurrency. For drivers of Kiki Nabib, the most popular mode of transportation around the busy streets of Lagos and other cities, the intense promotion of eNaira at a time when authorities are pressing cryptocurrencies has left them confused. The Central Bank of Nigeria has banned commercial banks from dealing with cryptocurrency exchanges.

“Why are you asking we To collect eNaira? “I thought the government said cryptocurrency was bad?” said driver Hamid Lawan, 23.

When Nigeria became the first African country to launch a central bank digital currency, or CBDC, it was partially targeting the nearly 40 million people in the country without a bank account. Policy makers also hope to get a share of Nigeria’s billions of dollars in remittance flows and expand the country’s tax base.

Disappointing results

The results, so far, have been disappointing. While eNaira uses a technology similar to a distributed ledger such as Bitcoin or Ethereum Saved in digital wallets, Nigerians’ passion for cryptocurrency does not extend to the offering of the central bank.

Virtual currencies have attracted residents of Africa’s largest oil producer as a hedge against inflation and currency devaluation, but eNaira is seen as a proxy for the challenges facing the continent’s largest economy and a symbol of mistrust in the ruling elite.

Educating Nigerians about digital currency is an essential task of both the central bank and the government. as the biggest Economie For its full release, it is also being scrutinized by more than 100 countries considering their CBDCs, according to Josh Lipsky, senior director of the Atlantic Council’s GeoEconomics Center.

“The Nigeria project is very important to the world,” he said. “My bottom line in Nigeria is that the jury is still out, but the world is paying close attention to what they’re doing.”

Cryptocurrencies have emerged amid the rise of thousands of cryptocurrencies, which are disrupting traditional payment systems and prompting central bankers to innovate to compete. digital money It aims to make payments safer, cheaper and more reliable, while giving governments in poor countries an alternative to underdeveloped ones. Banking Services systems.

Although central banks typically do not aim for global adoption, they need to achieve a critical mass of users, said Tommaso Mancini-Grifoli, division chief in the IMF’s Department of Money and Capital Markets. He said the authorities are aiming at the “perfect point,” where excessive use of central bank digital currencies could disrupt the flow of credit and possibly non-intermediate commercial banks overnight.

Misdirected messages

The relatively low adoption up to this point, though not uncommon for countries in the early stages of launching a digital currency, may be the result of insufficient incentives for commercial banks or misdirected consumer messaging, according to John Cave, managing director of CBE. Think Tank.

The Central Bank of Nigeria remains optimistic. After attracting nearly a million people to its digital platform, it is targeting 8 million users by next August.

All eNaira needs is a “small push from the government,” said Kingsley Obiora, the deputy governor in charge of economic policy at the central bank.

While virtual currencies have collapsed this year, their speculative appeal continues to attract Nigerians, World Health Organization It can also be used to bypass central bank foreign currency restrictions, according to Adisuji Solanke, director at Renaissance Capital in Lagos.

The shortage of dollars has prompted the central bank to ration foreign currencies on the official market, prompting the population to turn to the parallel market and more expensive cryptocurrencies.

“eNaira does not address any of these primary use cases, so it is not surprising that it has low adoption rates to date,” Solanke said.

Although the central bank last year asked lenders in the West African country not to deal with it Cryptocurrency Exchanges, Nigeria is ranked 11th in the world in cryptocurrency adoption, according to blockchain Chainalysis Inc. Specialist.

Nigeria’s enthusiasm for virtual currencies partly reflects the long history of the depreciation of the naira. Africa’s largest economy has devalued the naira about six times since 2015, and Bank of America Corp economist, Tatunga Rossik, expects a further weakening of 20% next year. These fears are exacerbated by record interest rates and inflation, which is at 17-year highs.

This makes eNaira difficult to sell, especially as it faces competition from well-established mobile banking apps. Babatunde Oprema, chief operating officer of the Fintech Association of Nigeria, said that with the funds loaded on eNaira wallets not counting as cash on the lender’s ledger, banks have little incentive to commercialize the digital currency.

At the same time, millennials and Generation Z – the main users of cryptocurrency – are skeptical about the central bank project.

“They see the regulator as being hostile to them, and therefore they have no interest in anything it has to offer,” Oprima said.

Since August, Nigerians without bank accounts have been able to open eNaira wallets using the so-called USSD code and their mobile phones. However, the government may need to provide more impetus, according to Adeje Oloy, founder of Open Banking Nigeria.

Deputy Central Bank Governor Obiora echoes this sentiment, noting that if half of the government’s salaries are paid in eNaira, it could be a “game changer”.

A positive sign is that those who have adopted eNaira are active users, according to Lipsky of the Atlantic Council. This is the opposite Chinawhere hundreds of millions of provinces were opened during a beta phase of the digital currency for central banks but with very low activity for the average user, he said.

For now, eNaira is still struggling, especially among the poorer communities it targets.

“Did you say eNaira?” Adamu Alidu, another taxi driver in Abuja, said, “I don’t have a bank account, let alone an eNaira.” “I, I don’t know anything about her.”

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