Can e-Naira ease Nigeria’s cash crunch?

The Central Bank of Nigeria recently announced that it is in talks with a New York-based technology firm, R3, to enhance the efficiency of the e-Naira and promote its adoption. The goal is to create new software for the digital currency that would provide the CBN with complete control over the initiative. Tosin Osunkoya, Co-managing Partner of Comercio Partners, shared his insights on the challenges and opportunities facing the e-Naira in a recent interview on CNBC Africa. The adoption of the e-Naira has been slow since its launch in October 2021. According to Osunkoya, there have been less than a million downloads and only about 700,000 transactions on the platform, totaling approximately 8 billion Naira. This pales in comparison to the 32 trillion Naira in e-payments recorded by NIBSS in September 2022. The low adoption rates can be attributed to several factors, including a lack of public education on how to use the e-Naira and infrastructure challenges. Osunkoya emphasized the need for massive investments in infrastructure and partnerships with key stakeholders such as NIBSS, fintech companies, banks, and merchants to drive the adoption of e-Naira. He pointed out that only a small percentage of the Nigerian population has smartphones, which limits the potential for mobile-based e-payments. While USSD technology could help bridge this gap, Osunkoya stressed the importance of addressing the underlying infrastructure issues to ensure a successful rollout of the e-Naira. In response to the challenges, the CBN plans to engage super agents on the ground to promote the e-Naira and provide market awareness. Osunkoya highlighted the importance of consistent and constant marketing efforts to maintain public interest in the digital currency. Given that 57% of Nigeria's economy operates in the informal sector and relies heavily on cash transactions, Osunkoya stressed the need to deliver a seamless user experience through the super agent framework to win over this population. Reflecting on the lessons learned from the Naira redesign policy, Osunkoya underscored the importance of adequate lead time for currency transitions and sufficient infrastructure and logistics support. He noted that while the CBN's intentions were good, the timeline for the transition was insufficient for a country of Nigeria's scale. Moving forward, Osunkoya emphasized the need for collaboration and careful planning to avoid disruptions in future currency initiatives. Despite the challenges, Osunkoya remains hopeful that with the right investments and strategic partnerships, the e-Naira could become a viable solution to Nigeria's cash scarcity. As the CBN continues to work towards enhancing the digital currency's efficiency and adoption, addressing key issues such as infrastructure, public education, and user experience will be crucial to its success.