Nigeria’s central bank partners with blockchain firm to spark eNaira adoption

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The Nigerian central bank has partnered with a local blockchain company to integrate its credit technology into the eNaira to spark the adoption of the central bank digital currency (CBDC).

The eNaira launched in October 2021 as Africa’s first CBDC and the world’s second after the Bahamas’ Sand Dollar. While it launched to much fanfare and with great expectations, it has failed to attract users, with distrust for central bank money, a lack of infrastructure, and poor execution by the central bank all playing a part.

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

According to an announcement shared with local media outlets, the CBN signed a Memorandum of Understanding (MoU) with Gluwa to “strengthen the technical capabilities of the eNaira.”

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

The CBN believes this will push financial inclusion in Nigeria and allow the unbanked to prove their creditworthiness and obtain loans from financial institutions.

“We are thrilled to share monumental news! After years of relentless effort, Gluwa has signed a Memorandum of Understanding with the Central Bank of Nigeria to officially onboard as a partner agent and help drive the increased adoption of Nigeria’s CBDC,” the startup stated.

“The partnership’s core objective is to harness the power of blockchain technology to enhance financial inclusion, improve eNaira functionality, and foster financial innovation.”

According to a 2023 International Monetary Fund (IMF) report, the eNaira has yet to reach 1% of Nigerians. Transactions are underwhelming, with the IMF finding that only 1.5% of the existing wallets are active weekly.

Nigeria is highly reliant on cash, and economists estimate that its informal economy is worth $220 billion. This comes with its challenges, not least of which is the lack of consumer credit histories, which keeps millions from advancing their businesses through credit facilities.

The eNaira was envisioned as the ultimate solution, but it has failed to live up to expectations. Its biggest indictment came last year when it could not attract users amid a severe cash crunch as the CBN redesigned the naira notes. Despite millions queuing at ATMs for hours as the country ran out of cash, the digital currency didn’t emerge as the best alternative—there was, however, a short-lived spike in usage.

Other efforts by the CBN to push adoption have also failed, including slashing merchant service charges and introducing USSD options.

In response to the eNaira’s lackluster adoption, Nigeria’s commercial banks are developing
a stablecoin to promote digital payments. Under the African Stablecoin Consortium, the banks have partnered with local fintechs to develop the cNGN stablecoin. The cNGN will reportedly be available on multiple public blockchains and will be available for listing on exchanges.

The eNaira’s struggles starkly contrast Nigeria’s rapid adoption of digital currencies. The West African country ranks first in Africa for digital asset trading and second globally after the United States for peer-to-peer trading volume. According to Chainalysis, the country is second globally for overall adoption, ranking only behind India.

To learn more about central bank digital currencies and some of the design decisions that need to be considered when creating and launching it, read nChain’s CBDC playbook.

Watch: BSV Stories Episode 10—The future has already arrived in Nigeria