Drivers and passengers of the motorized rickshaws, locally referred to as Keke Napep, who use the eNaira are eligible for a 5% discount. It’s the most recent effort to revive the virtual currency, which has only attracted one in 200 citizens of the continent’s most populated nation.
Many Nigerians are confused by the central bank’s concentration on cryptocurrencies because they cannot distinguish between the eNaira, which is backed by the government, and cryptocurrencies. The massive promotion of the eNaira at the same time that authorities are cracking down on cryptocurrencies has drivers of Keke Napep, the most popular mode of transportation through the congested streets of Lagos and other cities, perplexed. Commercial banks are not allowed to transact with cryptocurrency exchanges, according to the Central Bank of Nigeria.
Hamed Lawan, a 23-year-old driver, questioned why they were asking for eNaira. “I thought the government stated bitcoin is evil,” you say. Nigeria was the first government in Africa to launch a central bank digital currency, or CBDC, with a goal of reaching the country’s nearly 40 million unbanked citizens. Along with expanding the tax base, policymakers planned to share in Nigeria’s multi-billion dollar remittances.
The outcomes thus far have been underwhelming. Although the eNaira may be stored in digital wallets and uses comparable distributed ledger technology to Bitcoin or Ethereum, Nigerians’ enthusiasm for cryptocurrencies does not extend to the central bank product.
Residents of Africa’s top oil producer have been drawn to virtual currencies as a safety net against inflation and currency depreciation, but the eNaira is seen as a stand-in for the problems affecting the continent’s largest economy and a sign of mistrust in the ruling class.
The government and the central bank both have a crucial role to play in educating Nigerians about the digital currency. According to Josh Lipsky, senior director of the GeoEconomics Center at the Atlantic Council, it is being closely watched by the more than 100 countries who are considering creating their own CBDCs because it is the largest economy to fully debut.
“The world is really interested in Nigeria’s idea”, he remarked. “The world is closely watching what Nigeria is doing, but the verdict is yet out, in my opinion.”
The emergence of thousands of cryptocurrencies, which are upending established payment methods and forcing central bankers to innovate in order to compete, gave rise to CBDCs. The goal of digital money is to make payments cheaper, safer, and more dependable while providing governments with weak financial systems with an alternative.
Tommaso Mancini-Griffoli, a deputy division chief in the IMF’s Monetary and Capital Markets Department, stated that while central banks normally do not strive for widespread acceptance, they do need to reach a critical mass of users. Authorities are focusing on the “sweet spot” since, according to him, excessive CBDC use might impair the flow of credit and possibly displace commercial banks overnight.