Nigeria’s foray into Central Bank Digital Currency (CBDC) with the eNaira launch in October 2021 marked a significant milestone in the country’s digital financial evolution. However, recent comprehensive research reveals a sobering reality about the adoption challenges facing Africa’s first CBDC, offering critical insights for policymakers and financial institutions across the continent.
The trust paradox
The most striking finding from recent fieldwork based on research carried out by Gabriel Bizama of the University of Bern involving 1,000 Nigerian adults and merchants is the persistent trust deficit plaguing the eNaira. Despite being backed by the Central Bank of Nigeria (CBN), cash remains the most trusted form of money among Nigerians, followed by commercial bank deposits. The eNaira ranks last in trust levels, a counterintuitive outcome given that it represents a direct claim on the central bank. This trust paradox illuminates a fundamental challenge in digital currency adoption. While 96 percent of respondents acknowledge that their financial service providers are licensed and supervised by the CBN, this regulatory assurance hasn’t translated into confidence in the eNaira. The perception gaps between regulatory oversight and user trust suggest that institutional credibility alone is insufficient for CBDC success.
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The adoption cliff
Perhaps more concerning is the dramatic fall-off in eNaira usage. While 62 percent of the sample had previously used the eNaira, only 35 percent remain active users. This represents a significant churn rate that should alarm policymakers. The primary reasons for discontinuation include technical difficulties in funding eNaira wallets from bank accounts, limited merchant acceptance, and insufficient awareness campaigns during the launch phase. The convenience factor that initially attracted users, the same factor driving mobile money adoption, proved insufficient to maintain engagement. This suggests that convenience alone cannot sustain digital payment adoption without addressing fundamental infrastructure and ecosystem challenges.
Mobile money’s dominance
The research reveals that 98 percent of respondents are registered mobile money users, highlighting the platform’s superior market penetration compared to the eNaira. Mobile money’s success stems from its established agent network, reliable functionality, and widespread merchant acceptance. The network effect, where users adopt services because others in their network use them, has created a self-reinforcing cycle of adoption for mobile money platforms. Interestingly, both mobile money and eNaira users cite identical reasons for adoption: convenience and cost-effectiveness. However, mobile money’s head start and ecosystem maturity have created switching costs that the eNaira has struggled to overcome. This competitive landscape raises fundamental questions about market positioning for CBDCs in environments with established digital payment systems.
“These security challenges create a vicious cycle where poor experiences reduce trust, leading to lower adoption rates and continued reliance on cash. For the eNaira to succeed, robust security measures and transparent data protection protocols are essential.”
The connectivity challenge
Infrastructure limitations emerge as a critical barrier to digital financial services adoption. Poor connectivity ranks as the second most significant reason for not using mobile money, affecting 22 percent of non-users. Rural areas particularly suffer from unreliable internet connectivity, creating a digital divide that hampers financial inclusion efforts. Remarkably, 99 percent of respondents expressed interest in offline payment solutions, indicating massive unmet demand for connectivity-independent digital payments. This finding suggests that offline functionality could be the eNaira’s differentiation strategy, potentially addressing a critical gap in Nigeria’s digital payments ecosystem.
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Security concerns and data privacy
The research uncovers concerning security issues that undermine confidence in digital financial services. Unauthorised account access affects 42 percent of mobile money users, with rates reaching 50 percent in rural areas. Additionally, 58 percent of respondents report experiencing data breaches involving their personal financial information. These security challenges create a vicious cycle where poor experiences reduce trust, leading to lower adoption rates and continued reliance on cash. For the eNaira to succeed, robust security measures and transparent data protection protocols are essential.
Gender and geographic disparities
Women represent 60 percent of the research sample, yet they demonstrate higher security concerns, with 50 percent citing safety as a prerequisite for eNaira adoption compared to the overall average of 37 percent. This gender gap in digital financial services trust requires targeted interventions to ensure inclusive financial digitisation. Geographic disparities also emerge clearly, with urban areas (Lagos) representing 50 percent of the sample, peri-urban (Abuja) 25 percent, and rural areas (Kaduna) 25 percent. The concentration of smartphone ownership at 97 percent masks underlying connectivity and infrastructure challenges that disproportionately affect rural communities.
Merchant adoption: The missing link
Merchant acceptance represents the eNaira’s Achilles’ heel. Despite zero transaction fees for eNaira payments, merchants overwhelmingly prefer cash, followed by POS debit cards and mobile money transfers. The T+1 settlement cycle particularly affects micro and small merchants who require immediate liquidity for daily operations. This merchant adoption challenge creates a chicken-and-egg problem: consumers won’t adopt the eNaira without merchant acceptance, while merchants won’t accept it without sufficient consumer demand. Breaking this cycle requires coordinated interventions addressing both supply and demand sides simultaneously.
Strategic recommendations
The research findings suggest several strategic imperatives for the CBN and policymakers. First, investing in offline payment capabilities could provide the eNaira with a unique value proposition that mobile money cannot match. Second, addressing the onboarding challenges that make eNaira registration difficult compared to mobile money is crucial for user acquisition. Third, building merchant acceptance through targeted incentives, improved settlement times, and comprehensive education campaigns could create the ecosystem needed for sustained adoption. Finally, enhancing security measures and transparency in data protection could rebuild trust in digital financial services generally.
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The broader implications
Nigeria’s eNaira experience offers valuable lessons for other African countries considering CBDC implementations. The research demonstrates that technological capability alone is insufficient for successful digital currency adoption. Success requires addressing trust, infrastructure, security, and ecosystem challenges holistically. Rather than viewing mobile money as competition, CBDCs might achieve greater success by complementing existing digital payment systems while addressing their limitations. The goal should be expanding the digital payments pie rather than simply capturing market share from existing players. As Nigeria continues refining its CBDC strategy, the path forward requires balancing innovation with practical user needs, ensuring that the eNaira becomes a tool for genuine financial inclusion rather than just technological advancement.
Dr. Oluyemi Adeosun, Chief Economist, BusinessDay Media
