IMF finds space for eNaira improvement in its first-year evaluation
IMF researchers believe that the Central Bank of Nigeria's uneven execution of the CBDC's two main aims of facilitating remittances and extending financial inclusion to the unbanked has delayed them.
The International Monetary Fund (IMF) has a late birthday present for Nigeria's eNaira central bank digital currency (CBDC) in the shape of a working paper summarising its first year of performance. Regarding the eNaira's first year, IMF experts called it "laudable," but they also made several recommendations.
After the Bahamian Sand Dollar, the eNaira debuted in October 2021 as the second CBDC in the globe. The report discovered that eNaira's retail side was intermediated but had no latency issues because it hasn't yet gained traction beyond its early users. According to IMF experts, the Central Bank of Nigeria's staggered implementation delayed the CBDC's two main objectives of increasing financial inclusion to the unbanked and enabling remittances.
In its initial evaluation, IMF finds space for eNaira improvement
The eNaira central bank digital currency (CBDC) of Nigeria received a late birthday gift from the International Monetary Fund (IMF) in the form of a working paper outlining its first year of performance. IMF specialists praised the eNaira's first year, but they also provided many recommendations.
The eNaira made its debut as the second CBDC in the world in October 2021, following the Bahamian Sand Dollar. The investigation found that although eNaira's retail side was intermediated, it didn't have any latency problems because it hasn't yet expanded beyond its early adopters. The CBDC's two primary goals of expanding financial inclusion to the unbanked and facilitating remittances were postponed, in the opinion of IMF analysts, by the Central Bank of Nigeria's staggered implementation.
Only 802,000 transactions totaled during the time period under consideration, and only roughly 1.5% of wallets are active on any given week. fewer than 1% of bank accounts in the nation have wallets, hence the results indicate fewer than one per wallet. The study found:
Like other network goods with comparable characteristics (such as credit cards), breaching the initial low adoption equilibrium calls for a combination of cunning tactics and good fortune.
A major issue mentioned in the study is how the eNaira fits into Nigeria's extensive network of mobile money operators (MMOs). The CBDC might engage in direct retail competition with MMOs or serve as a conduit for MMO activities. The study referred to the eNaira's replacement of all MMOs' services as "hard to imagine," but it also pointed out that a bridge function may trigger a challenging "industry reshuffle."
The IMF claims that the eNaira is a single-currency system and cannot support remittances directly, but it also noted that this might be fixed by enabling foreign money transfer companies to accept eNaira wallets or via intermediation. The former was suggested by researchers, but both solutions will continue to be pricey, which the IMF views as a severe issue given the parallel, underground market that provides the same purpose.
The study offers a few suggestions for increasing eNaira acceptance, including using it for social payments in combination with MMOs that enhance the social currency transfer mechanism. Another incentive for using the eNaira might be for retailers. The Central Bank of Nigeria has begun to promote inclusion through the paper notes known as the eNaira, but remittances continue to be a concern.
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