51% of Nigerian adults use formal financial services, such as commercial banks, microfinance banks, mobile money, insurance policies, or pension accounts, according to the EFInA Access to Financial Services in Nigeria 2020 Survey. Nigeria’s growth is largely due to the growth of banking, with 45% of its population being banked in 2020, up from 40% in 2018.
The birth of the eNaira
The eNaira was designed and implemented by public authorities and is accompanied by a strong public sector commitment.
The central bank digital currency like cash, is a liability of the central bank and is therefore not subject to credit risk, providing greater safety to end-users. As with cash, it can serve as a tangible link between the government and the central bank.
The eNaira as central bank-operated system may be able to establish fees and establish rules for the use of data that reflect public interest rather than commercial interests.
All licensed payment service providers could use a CBDC system, either if it is built from the ground up or upgraded from existing systems. Public authorities would be encouraged to reform governance and access policies of payment systems in a way that promotes security, reliability, and efficiency.
eNaira is expected to be adopted by 90 percent of Nigeria’s population, according to the International Monetary Fund, which provided technical assistance during the rollout.
It is possible that eNaira could introduce more vibrancy and innovation to the market by enabling new PSPs to enter, providing payers and payees with more tailored and compelling value propositions.
Due to the nature of centralized digital assets as an open loop, they can encourage more open innovation and facilitate the introduction of new services, since CBDC-based services are assumed to be universally accepted.
The eNaira can enable payments in new contexts like the “internet of things,” and their programmability will make it possible to embed payment services into commercial and social interactions and enable their orchestration.
The eNaira design may enable users to take control of the data generated by payment transactions, which would otherwise remain the exclusive property of a few players in concentrated markets.