The Central Bank of Nigeria (CBN), has signed a Memorandum of Understanding (MoU) with blockchain technology platform, Gluwa to increase the adoption of Nigeria’s digital currency, the eNaira.
As an agent partner of CBN, Gluwa will integrate its Credal technology into the eNaira platform, to enable the creation of credit reputations for unbanked users thus furthering financial inclusion. The credit profiles created will be accessible across borders and increase the CBDC’s effectiveness.
This partnership core objective is to harness the power of blockchain technology to enhance financial inclusion, improve eNaira functionality and foster financial innovation.
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Gluwa disclosed that it will roll out plans for improving eNaira’s utility over the course of 2024 with the CBN aim to make eNaira a beacon example of CBDCs by transforming it into a dependable, meaningful currency for its users.
The partnership between Gluwa and the CBN will focus on the following;
• Simplifying Fintech Lending – Enabling fintech lenders to expedite the loan origination process by facilitating direct eNaira transfers to customers, thereby enhancing the speed and efficiency of services provided.
• Authenticating Transactions – Establishing the eNaira as the definitive record for all loan transactions conducted by fintech partners, ensuring accuracy and transparency in financial operations and credit scoring.
• User Authentication – Implementing a robust authentication mechanism utilizing asymmetric encryption with private/public keys, to offer users a secure, private, and regulatory-compliant way of accessing financial services.
CBN’s partnership with Gluwa is the latest of many attempts by the apex bank to boost the adoption of the eNaira. Since the launch of the digital currency in October 2021, a month after launch, the eNaira picked up 500,000 wallet downloads and seemed set for success.
However, the CBDC failed to live up to expectations. It took 10 months to hit $10 million in transaction value and only 1.4 million transactions in May 2023. In the same month of 2023, the International Monetary Fund (IMF) said 98.5 percent of eNaira wallets have never been used.
The IMF explained that the downloaded wallets recorded low transactions, while some have not been active except for the initial surge it recorded shortly after it was launched. It added that the average number of eNaira transactions weekly was carried out only by 1.5 percent of downloaded wallets.
The fund further noted that the eNaira’s potential in financial inclusion requires a strategy to set the right relationship with mobile money, given the former’s potential to either complement or substitute the latter.
Also, Stakeholders in Nigeria advised the Central Bank of Nigeria (CBN) to collaborate with fintech companies to aid the adoption of eNaira.
Fast-forward to February 2024, reports disclosed that the value of eNaira in circulation rose by 302 percent in nine months to N10.26 billion at the end of September reflecting increased adoption of Africa’s Central Bank Digital Currency.
The upsurge in the value of the eNaira in circulation follows additional measures implemented by the CBN to boost adoption and usage among members of the banking public.
These include the introduction of the Enhanced USSD service channel which targets feature phone users and allows Nigerians to open an eNaira wallet and conduct transactions by simply dialing *997 from their mobile phones
According to sources close to the apex bank, the upsurge in eNaira adoption was driven by transactions via the USSD channels. It was gathered that the volume and value of eNaira transactions via the USSD channel rose year-on-year, YoY by 92.95 percent and 120.93 percent in 9M’23 respectively while the number of merchants accepting eNaira also rose 11.97 percent during the same period.