One year later: eNaira as a force for financial inclusion and digital payments

Despite successes, some marginalised groups still face financial exclusion

Central bank digital currencies are one of the innovative ways central banks are diversifying. A key consideration for decision-makers is how such digital currencies could improve the efficiency of commerce and cross-border payments. CBDCs have launched in 11 countries, while 15 more are testing and 26 are developing one. Nigeria is a leader here, with its already launched eNaira already impacting local and cross-border payments.

During the 2022 eNaira Hackathon, Central Bank of Nigeria Governor Godwin Emeiele pointed to the encouraging growth in eNaira adoption. Emefiele said, ‘Since the launch of this great initiative, the eNaira has reached 840,000 downloads, with about 270,000 active wallets comprising over 252,000 consumer wallets and 17,000 merchant wallets. In addition, the volume and value of transactions on the platform have been remarkable, reaching above 200,000 and ₦4bn[$9m], respectively.’

At the first anniversary of the eNaira’s launch, Bitt, CBN’s technology partner, talked about introducing unstructured supplementary service data, or quick codes, as a way to further develop the digital currency. This represents a massive opportunity to bridge the gap in national and sub-national financial inclusion levels.

By implementing quick codes, the eNaira could improve access to finance for individuals and businesses through digital channels, lower the cost of transactions and increase the flow of credit to consumers and businesses.

Financial inclusion is key for Nigeria’s economic development strategy. Despite the obvious successes, women, youth, small- and medium-sized enterprises, and people living in rural areas are still disproportionately excluded from the financial system. The introduction of USSD shows that there is a roadmap towards deepening access for the unbanked.

Payment networks must be able to integrate the eNaira to fully onboard these new entrants into the national financial system. Then they can take part fully in ecommerce and other value-adding financial services without having a bank account.

Beyond financial inclusion, the eNaira is also useful in cross-border payments and transfers. Remittances represent one of the most compelling use cases for digital currencies. By eliminating intermediaries, the eNaira could be a reliable low-cost payments solution for consumers and businesses. The Bank for International Settlements outlined in a 2021 report the benefits of CBDCs in reducing costs and increasing the speed of remittances. It stated that CBDCs could reduce transaction times from three to five business days to seconds. It also reported a PricewaterhouseCoopers estimate showing a possible 50% reduction in the cost of cross-border payments.

Flutterwave has recently announced the integration of eNaira on Flutterwave for Business. Merchants and consumers can now transact using the safe and convenient eNaira on all Flutterwave channels.

One year on from its launch, the eNiara continues to grow. But there’s still a long way to go, especially in local and cross-border payments.

Out of the 19 recommendations made in the 2021 BIS report, there are five that stand out as the most important. Institutions and firms must first develop a common cross-border payments vision and targets and then implement international guidance and principles. The community must also align regulatory, supervisory and oversight frameworks, as well as factoring in an international dimension into CBDC designs. Finally, it must pursue the interlinking of payment systems.

If the frameworks and building blocks are available, Africans will adopt CBDCs, just as they did smartphones. The continued adoption of the eNaira would provide more data for the design of better macroeconomic policies that will positively affect consumers and business owners.

Olugbenga Agboola is Founder and Chief Executive Officer of Flutterwave.

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