Navigating Headwinds: How Nigeria Crypto Ban Impacted eNaira Adoption Amidst Global Recognition

The widespread prohibition imposed by the Central Bank of Nigeria in 2021, which restricted regulated financial institutions from catering to crypto exchanges, has considerably impeded the acceptance of the eNaira central bank digital currency (CBDC), as indicated by Chinedu Albert, a legal expert specializing in Nigerian technology and innovation.

During the interview, Albert conveyed that the Nigerian Central Bank Digital Currency (CBDC) remains an ambitious concept, serving as the government’s reaction to what he deemed an “ill-advised” comprehensive ban on cryptocurrency and other digital assets.

Despite Nigeria earning a high ranking in Chainalysis’ 2021 Global Crypto Adoption Index, it is reflecting a demand for a currency insulated from governmental regulations and inflation—a characteristic provided by certain cryptocurrencies—Albert argued that the eNaira is experiencing slow adoption due to its lack of this protective feature, a fundamental quality associated with cryptocurrencies.

A research report from KuCoin in 2022 underscored a growing trend among Nigerian citizens to increasingly turn to cryptocurrencies as a practical alternative for storing and transferring assets. Reports from local media reveal that the national fiat currency, the Nigerian naira, experienced a significant devaluation of 23% in the third quarter of 2023. This depreciation is pivotal in motivating local investors to consider deflationary assets like Bitcoin.

Albert Urges Confidence In Nigeria Naira & Authority

Albert underscored that Nigerians need more confidence in the naira and the central authority overseeing it. He expressed that adopting the eNaira will only materialize once the government successfully earns the trust of Nigerians and the naira achieves a more reputable standing.

Introduced on Oct 25, 2021, the eNaira, Africa’s inaugural Central Bank Digital Currency (CBDC), has been accessible for transactions by the general public. However, a report from the International Monetary Fund in May 2023 revealed a mere 1.5% utilization of naira, with approximately 14,000 weekly transactions, indicating a notably low adoption rate as 98.5% of wallets remain inactive each week, marking what the report termed as “disappointingly low adoption.”

Despite lifting the ban on digital assets for Nigerian banks and financial institutions on Dec 23, a trust deficit persists, which the Central Bank of Nigeria (CBN) and its eNaira must surmount. Previous actions such as the cryptocurrency ban, the closure of crypto-associated bank accounts, foreign exchange manipulations, and a recent redesign of the naira have collectively left an unfavorable impression on many Nigerians regarding the central bank and its policies.

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The author’s views are for reference only and shall not constitute any investment advice. Please ensure you fully understand and assess the products and associated risks before purchasing.

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