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Nigeria’s eNaira Is Not an Economic Panacea

After trying to ban cryptocurrencies, the country’s Central Bank has launched its own digital currency—but it won’t end the country’s foreign exchange volatility or shore up its reserves.

By , a freelance journalist in Nigeria.
A man exchanges Nigeria’s currency, the naira, for U.S. dollars in Lagos, Nigeria, on April 19.
A man exchanges Nigeria’s currency, the naira, for U.S. dollars in Lagos, Nigeria, on April 19.
A man exchanges Nigeria’s currency, the naira, for U.S. dollars in Lagos, Nigeria, on April 19. PIUS UTOMI EKPEI/AFP via Getty Images

When Nigeria announced its plans to become the first African country to digitize its currency earlier this year, many Nigerians were skeptical, questioning how a digital currency worked and whether Nigeria needed one. But any concerns about popular interest in the currency were quickly put to rest when the website for the new currency—the eNaira—garnered more than 1 million impressions online just 24 hours after launching in late September.

The government’s reasons for introducing the eNaira were clear. Since oil prices crashed in 2014, the Nigerian economy has struggled to stay afloat—and so has the naira. The value of the naira has plunged roughly 160 percent against the dollar since 2012, a steep drop that has spiked inflation. Headline inflation in Nigeria is currently above 16 percent, and the official exchange rate hovers around 411 naira to the dollar (and at more than 560 on the street). The impact of these figures becomes clear when one considers that imports make up 65 percent of Nigeria’s total trade and that the naira-dollar exchange rate is central to most of these transactions.

The Central Bank of Nigeria proposed an electronic currency as a solution to these economic problems and others. The bank promised that the eNaira would help increase cross-border trade, improve financial inclusion, strengthen social interventions, and bolster Nigeria’s monetary policy and payment systems. About 75 percent of informal cross-border trade in West Africa is not reflected in official statistics, and 38 million Nigerians don’t have access to formal financial services. Government-funded cash transfer programs in Nigeria are also notorious for not reaching the poor Nigerians who need them most.

When Nigeria announced its plans to become the first African country to digitize its currency earlier this year, many Nigerians were skeptical, questioning how a digital currency worked and whether Nigeria needed one. But any concerns about popular interest in the currency were quickly put to rest when the website for the new currency—the eNaira—garnered more than 1 million impressions online just 24 hours after launching in late September.

The government’s reasons for introducing the eNaira were clear. Since oil prices crashed in 2014, the Nigerian economy has struggled to stay afloat—and so has the naira. The value of the naira has plunged roughly 160 percent against the dollar since 2012, a steep drop that has spiked inflation. Headline inflation in Nigeria is currently above 16 percent, and the official exchange rate hovers around 411 naira to the dollar (and at more than 560 on the street). The impact of these figures becomes clear when one considers that imports make up 65 percent of Nigeria’s total trade and that the naira-dollar exchange rate is central to most of these transactions.

The Central Bank of Nigeria proposed an electronic currency as a solution to these economic problems and others. The bank promised that the eNaira would help increase cross-border trade, improve financial inclusion, strengthen social interventions, and bolster Nigeria’s monetary policy and payment systems. About 75 percent of informal cross-border trade in West Africa is not reflected in official statistics, and 38 million Nigerians don’t have access to formal financial services. Government-funded cash transfer programs in Nigeria are also notorious for not reaching the poor Nigerians who need them most.

The eNaira was presented as a practical solution to these long-standing economic problems, even though it could never solve the problem of Nigeria’s unstable exchange rate and dwindling foreign reserves on its own.


Nigeria has officially pegged the exchange rate of the naira to the dollar in one form or another since 1993, in an effort to bring predictability to international trade. However, the nature of the exchange rate management system has been based on the availability of foreign currency reserves, and it has changed dramatically over the years. The peg was most recently lifted in June 2016 after oil prices crashed by 70 percent in late 2014 and foreign reserves took a hit.

Since crude oil sales contribute up to 95 percent of Nigeria’s foreign exchange earnings, the Central Bank finally removed the peg in 2016 and allowed the naira to float freely with other foreign currencies as liquid foreign exchange reserves fell to about $26.7 billion, and it could not support Nigeria’s monthly import bill of 917.6 billion naira. At the peak of the currency devaluation in August 2016, the official dollar to naira exchange rate was 344. Today, in December 2021, the spot rate is around 411 naira per dollar.

Perhaps there would have been less public consternation if the issue was about a 19.4 percent decline in the official exchange rate over a five-year period. However, it is on Nigeria’s unyielding unofficial exchange market (or “parallel market”) that things are running amok. There, buoyed by hoarding and speculation, a dollar costs up to 560 naira today, up from 475 naira this past January—a 17.9 percent devaluation within eleven months that has drastically weakened purchasing power.

The frantic scenes in the parallel market are closely connected to the Central Bank’s policy directive in July to stop the weekly sale of about $110 million to Bureau de Change operators, on the grounds that these money-changers had become conduits for graft and illicit financial flows. These foreign exchange businesses, now numbering close to 3,000, served to bridge the supply gap of foreign currency in Nigeria by retailing it to owners of small and medium enterprises, who generally need less than $20,000 per quarter to import business items. But without access to foreign currencies from the Central Bank, the money-changers now source foreign currency from some Nigerians who have received foreign-denominated travel allowances from commercial banks, all of which increases scarcity and arbitrage in an already nebulous system.

The naira has tumbled more than 13 percent since the bank’s latest directive in July, and the currency is now at an all-time low to the dollar on the parallel market. Moreover, the lack of alignment between the federal government and the Central Bank has led to a divergence in fiscal and monetary policy. Nigerian Vice President Yemi Osinbajo recently acknowledged that the government and Central Bank weren’t coordinating their responses to the foreign exchange crisis. The bank “doesn’t know what we are doing,” he said, before adding that the naira was “artificially low.”


The Central Bank of Nigeria has long had a love-hate relationship with digital currencies. In February, it prohibited all Nigerian financial institutions from dealing in cryptocurrency due to its anonymity and supposed lack of traceability. At the time, many Nigerians scoffed at the decision, and they saw it as another example of the Central Bank being restrictive. Nigeria, after all, is a global leader in the cryptocurrency trade; Nigerians traded over $400 million on local cryptocurrency exchanges in 2020 alone. Cryptocurrency has served as a workaround against the Central Bank’s foreign exchange restrictions and as a hedge against rising inflation.

Suddenly, in October—just eight months after prohibiting cryptocurrency financing—the bank launched its own digital currency: the eNaira. The Central Bank says the decision to digitize the naira was reached in 2017, following extensive research considering “significant explosion in the use of digital payments and the rise in the digital economy.” Unlike the physical naira, the eNaira does not earn interest when deposited. Rather, its core function is to improve cross-border payments, accelerate financial inclusion, make direct remittances to Nigeria cheaper and faster, enable direct welfare disbursements to Nigerians, and facilitate tax revenue collection.

Built on a distributed ledger technology built by Bitt Inc., a financial software company, the eNaira is now available to users through the eNaira speed wallet, which can be downloaded from mobile phone app stores. It exchanges one to one with the naira and is now an official tender of Nigeria, alongside the naira. Individuals, businesses, and government departments can begin using the eNaira once they complete what are known as “know your customer requirements” and fund their eNaira wallet through their bank accounts.

The eNaira has many uses. Informal cross-border trade remains pervasive in West Africa; estimates reveal that 43 percent of sub-Saharan Africans earn a part of their livelihood from informal trade across borders. The eNaira can promote real time payments along the country’s borders by allowing cross-border traders to pay for goods directly with the digital currency through their respective eNaira wallets. For example, a Nigerian trader who holds eNaira in an eNaira wallet can transfer it to a trader in Benin. The Beninese trader can transfer the eNaira back to another Nigerian trader or hold it in their wallet until they decide to convert the currency to CFA francs. The advantage of the eNaira is that it is strictly peer-to-peer, and it makes transfer of Nigeria’s naira faster for cross-border payments.

The eNaira can also drive financial inclusion in Nigeria. Some 38 million Nigerians are currently excluded from the financial system, even though the Central Bank has set a target of 95 percent adult financial inclusion by 2024. The eNaira can improve financial inclusion by allowing the Central Bank to credit the account of anyone who signs up for the eNaira speed wallet either directly or through partner financial institutions without the need for a bank account.

The eNaira can also make foreign remittances to Nigeria cheaper and faster. Nigeria accounts for 40 percent of total remittance flows to sub-Saharan Africa, and total remittances to Nigeria in 2023 are projected to reach nearly $35 billion, more than 6 percent of Nigeria’s GDP. However, informal remittance systems and a lack of timely data have contributed to higher fees across sub-Saharan Africa, where transfer costs remain at 9.3 percent as opposed to the global average of 7 percent. Through a formal and digital system like the eNaira speed wallet, remittance flows to Nigeria can be transferred more speedily on a peer-to-peer basis.

Despite the eNaira’s many benefits, the general public lacks awareness of its exact uses (and whether it’s a cryptocurrency or not), and the rollout has been plagued by problems. Already, there have been negative reviews on the Google Play Store about the dysfunction of the eNaira speed wallet app, and the app has been taken down due to “technical glitches,” only to reappear a few days later. The Central Bank says it will not be held financially responsible for errors arising from usage of the eNaira website—a surprising declaration that did not boost public confidence in the currency.

In a pseudo-authoritarian state like Nigeria, relying on a central bank digital currency can also be dangerous. After young Nigerians used cryptocurrencies in their efforts to mobilize against police brutality and state-sanctioned violence last October, the Central Bank froze several of their accounts and then banned cryptocurrencies. As the eNaira becomes increasingly popular, it’s possible that the bank could also use it to target activists in future protests.

For an idea that was raised in 2017 but only actively developed in 2021, there’s a sense that the eNaira might be the Central Bank’s latest attempt at distracting Nigerians from the naira’s woes. After all, only sustained foreign exchange earnings and a free floating of the naira can improve the true value of the currency.

As the world grapples with the most severe oil shortages in recent times, energy analysts warn that prices may soon surge to $100 per barrel. This means that the coming year could be an opportune time for Nigeria to sell crude oil at close to its fiscal break-even price of $133 for the first time in five years, thereby boosting its foreign reserves and ending the foreign exchange crisis while rolling out its new digital currency.

If the Central Bank of Nigeria corrects its early mistakes and properly executes the eNaira project amid high oil prices, then the digital currency could end up solving many latent economic issues in Nigeria.

Doyin Olagunju is a freelance journalist in Nigeria who also publishes National Cake, a weekly newsletter about Nigerian politics, policy, and culture.

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