Nigeria’s crypto ban hindered eNaira adoption despite high global ranking

cointelegraphPubblicato 2023-12-28Pubblicato ultima volta 2023-12-29

The 2021 ban by the Central Bank of Nigeria, prohibiting regulated financial institutions from servicing crypto exchanges, significantly hampered the adoption of eNaira, according to Nigerian tech and innovation legal expert Chinedu Albert.

In an interview with Cointelegraph, Albert said the Nigerian central bank’s digital currency (CBDC) is still a lofty idea representing the government’s response to its ‘ill-advised’ blanket ban on cryptocurrency and other virtual assets.

Chainalysis in 2021 ranked Nigeria high in the Global Crypto Adoption Index, reflecting the demand for a currency unaffected by government policies or inflation, a feature offered by cryptocurrencies. However, Albert stated that the eNaira faces low adoption because it lacks this shielding element, an essential quality of cryptocurrencies.

A 2022 study by crypto exchange KuCoin highlights that many Nigerian citizens have started using cryptocurrencies as a viable alternative to store and transfer assets. According to local media, the naira, the nation’s fiat currency, lost 23% of its value in the third quarter of 2023. This loss of value is a critical driver for local investors to eye deflationary assets such as Bitcoin BTC.

Albert emphasized that Nigerians do not have faith in the naira or the central body that controls it. He said that adopting the eNaira will only happen when the government gains the trust of Nigerians and the naira attains a more trusted status.

The eNaira, Africa’s first CBDC, was released on October 25, 2021, and it’s been open to everyone to transact with. A May 2023 IMF report indicated approximately 14,000 eNaira weekly transactions, representing only 1.5% of the total wallets. This implies that 98.5% of wallets go unused weekly, pointing to “disappointingly low adoption.”

Despite lifting the ban on digital assets for Nigerian banks and financial institutions on Dec. 23, the CBN and its eNaira have a trust deficit they must overcome. Actions such as the ban on crypto, closure of crypto-linked bank accounts, forex manipulations, and, more recently, the naira redesign have left a negative impression on many Nigerians about the Apex Bank and its policies.

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