To what extent can the Nigerian Central Bank Digital Currency eNaira help resolve financial inclusion problems in Nigeria and deliver financial services to rural regions?

Abstract:

This research proposal is directed towards discussing the potential of the Nigerian Central Bank Digital Currency, eNaira, to narrow financial inclusivity issues in Nigeria. It considers the benefits of the digital currency, such as decreased transaction costs and improved accessibility, and also touches on its failure to establish in the Nigerian society. The main issues driving this failure are discussed, and policies are recommended to facilitate the implementation of the currency.

 

Introduction:

The post-COVID period has brought about the necessity of digital currencies, which are thought to play a critical role in fostering financial inclusivity - the provision of formal financial services to individuals worldwide (GPFI, 2023). Various global frameworks underline the macroeconomic goal of achieving financial inclusivity and reducing poverty. The United Nations Sustainable Development Goals (SDGs), for instance, are actively working towards making financial services accessible globally through technologies such as digital currencies (World Bank Group, 2021). As in the rest of the world, financial exclusivity remains a major issue in Sub-Saharan African (SSA) countries, for which the Central Bank of Nigeria (CBN) introduced a Central Bank Digital Currency (CBDC) eNaira, in October of 2021, making Nigeria the first African country to adopt a CBDC (Jones, 2023). The eNaira is a digital currency that uses a USSD code, meaning it is available for use both online and offline. This trait is paired with the fact that eNaira has low transaction costs, making it a cheaper and more accessible alternative for many Nigerians. With the implementation of “wallets”, the eNaira allows both domestic and international transactions to be carried out for a lower price through the International Money Transfer Operators (IMTOs) (Obiora and Ozili, 2023). Although eNaira was envisioned to substantially increase financial accessibility given its hybrid structure, its implementation in the Nigerian society has been rather underwhelming. The eNaira remains significantly underused, with only 0.5% of Nigerians using it, and 98.5% of wallets remaining unused (Anyamele, 2024). This is partly due to the blatant lack of confidence within society, with a common belief being that the Nigerian government has deliberately introduced this currency to keep track of all transactions. Without a growth in confidence, eNaira’s success rate is likely to become more hindered, indicating the need for the CBN to implement supporting policies such as public financial awareness campaigns (Onumoh et al. , 2023). All in all, the potential of eNaira to resolve financial exclusion problems is highlighted in various studies, which state that the addition of policies such as ensuring digital literacy in rural areas, implementing transfers in eNaira, and popularizing the currency in areas where no digital currency alternative exists (Anyamele, 2024), can help narrow the misunderstanding that obstructs the smooth implementation of the currency within society.

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Literature Review:

Akindipe, 2023 - This study highlights the possibility of CBDCs, particularly eNaira, to solve financial exclusion in Nigeria. It recognises that the implementation of eNaira has failed to progress, and hence recommends that it becomes more compatible with other CBDCs to enhance information sharing and interconnectedness with the central bank.

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Ephraim et al., 2023 - This study uses a qualitative approach of conducting a survey to comprehend the problems behind the acceptance of eNaira within the Nigerian society. It shows the discovery that due to poor connection, many had problems accessing the USSD code that the currency is based on, indicating the need for improvements. It recommends awareness campaigns in order to popularize eNaira, particularly on social media platforms, and improvements in the mobile networks within the country.

 

Methodology:​ 

1. Analyzing Google Trends data for the terms “eNaira” and “financial inclusion” in Nigeria, from November 2021 to April 2025 (Ozili, 2023).

The quantitative approach of using Google Trends data can be used to investigate the frequency of searches with keywords of “eNaira” and “financial inclusion” over the time period of November 2021 to April 2025 in Nigeria. Given the relatively low response to the introduction of eNaira, the data, as shown in figure #1, gives direct insights into the popularity of the two among Nigerians.

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2. Collection of data by questionnaires (Oluwaleke et al., 2023)

Digital questionnaires have been integrated in various studies regarding the use and implementation of eNaira in the Nigerian society. Different values, such as the knowledge about eNaira, or the tendency to use the eNaira, can be collected. The primary data can then be run through software such as SPSS, and the reliability can be tested by Cronbach’s Alpha:

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3. Adoption rate Alternatively, the economic approach of adoption rate can be used, measuring the rate at which the Nigerian society is likely to start consuming the eNaira currency. The following can be calculated with the formula:

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Citations :

1. Akindipe, Oluwaleke Ebenezer . “Awareness and Understanding of Enaira in Nigeria.” Acta Universitatis Danubius. Œconomica, vol. 19, no. 5, 2023, pp. 24–41, www.ceeol.com/search/article-detail?id=1217394. Accessed 30 Apr. 2025

 

2. Anyamele, Uchenna . The ENaira as a Tool for Financial Inclusion: Challenges and Recommendations. EPR, 2024.

 

3. Collins, L.M. “Research Design and Methods.” Encyclopedia of Gerontology, 2007, pp. 433–442, www.sciencedirect.com/topics/nursing-and-health-professions/cronbach-alpha-coefficient#:~:tex t=Cronbach’s%20alpha-,Cronbach’s%20alpha%20is%20a%20way%20of%20assessing%20relia bility%20by%20comparing,items%20relative%20to%20the%20variance., https://doi.org/10.1016/b0-12-370870-2/00162-1. Accessed 30 Apr. 2025.

 

4. Ephraim, Bernard, et al. “The Nigerian ENaira and the Currency Redesign Policy: A Review on Their Effectiveness.” International Journal of Multidisciplinary Research and Publications(IJMRAP), vol. 5, no. 12, 2023, pp. 31–34, d1wqtxts1xzle7.cloudfront.net/105555951/IJMRAP_V5N11P115Y23-libre.pdf?1694008479=&r esponse-content-disposition=inline%3B+filename%3DThe_Nigerian_eNaira_and_the_Currency _Red.pdf&Expires=1746036123&Signature=MNP1C6~-VVzHYI-5xSGWoUd8fyqUXI4pT2m wIwx~UML2kUr5eaavOa0zAIwBxUuGwzbXAXl8-7DacvuiG79nPx7aA2IJ5G4dewY9AU6Xw 7WtFt71K~~v~AdbhbzIlTLAsmsyaEfls7ynhNBizTilvVg1JDy4iGXw0-FGeWVE1Jw20M97~u XhR9~dxWgPNSmDmfEeyjkMVlFnQDfKa26P-bPyO3QzkU5HXlHeSuCspuvWejWjzX6Wj6k YwBDEjyU8dV-k84LScs2dw-KmJCUpqv68mahk23mYNP9PlTFWIpkhyKvBt~sOjMNajwsK1 7vwluKLCw7gk4RWjbQUp0Rkaw__&Key-Pair-Id=APKAJLOHF5GGSLRBV4ZA. Accessed 30 Apr. 2025.

 

5. GPFI. “G20 2023 Financial Inclusion Action Plan | GPFI.” Gpfi.org, 19 Sept. 2023, www.gpfi.org/publications/g20-2023-financial-inclusion-action-plan. Accessed 25 Apr. 2025.

 

6. Jones, Marc. “Study Shows 130 Countries Exploring Central Bank Digital Currencies.” Reuters, 28 June 2023, www.reuters.com/markets/currencies/study-shows-130-countries-exploring-central-bank-digitalcurrencies-2023-06-28/#:~:text=Eleven%20countries%2C%20including%20a%20number,comm erce%20to%20government%20stimulus%20payments. Accessed 30 Apr. 2025.

 

7. Ozili, P. K. "CHAPTER SEVEN: THE eNAIRA AS A TOOL FOR FINANCIAL INCLUSION IN NIGERIA." OF DIGITAL CURRENCIES (2023): 141. ---. “Study Shows 130 Countries Exploring Central Bank Digital Currencies.” Reuters, 28 June 2023, www.reuters.com/markets/currencies/study-shows-130-countries-exploring-central-bank-digitalcurrencies-2023-06-28/#:~:text=Eleven%20countries%2C%20including%20a%20number,comm erce%20to%20government%20stimulus%20payments. Accessed 30 Apr. 2025.

 

8. Obiora, and Ozili . RESEARCH DEPARTMENT CENTRAL BANK of NIGERIA ECONOMICS of DIGITAL CURRENCIES: A BOOK of READINGS. 2023.

 

9. Oladotun Larry Anifowose, and Bibi Zaheenah Chummun. Determinants of Financial Inclusion in Sub-Saharan Africa (SSA) Countries from 1999 to 2024. 20 Mar. 2025, www.preprints.org/manuscript/202503.1455, https://doi.org/10.20944/preprints202503.1455.v1. Accessed 29 Apr. 2025.

 

10. Oluwaleke, and Ebenezer Akindipe . “Awareness and Understanding of Enaira in Nigeria - ProQuest.” Proquest.com, 2023, www.proquest.com/openview/f88b5dc62e37a6853b88d7c7a2f2617f/1?cbl=2042665&pq-origsit e=gscholar. Accessed 30 Apr. 2025.

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11. Onumoh, Yahaya Ahmed , et al. DIGITAL CURRENCY the FINANCIAL INCLUSION BENEFITS and CHALLENGES in the IMPLEMENTATION of ENAIRA. INTERNATIONAL JOURNAL OF PROGRESSIVE RESEARCH IN ENGINEERING MANAGEMENT AND SCIENCE (IJPREMS), 2023.

 

12. UCLA Advanced Research Computing. “What Does Cronbach’s Alpha Mean? | SPSS FAQ.” Ucla.edu, 2016, stats.oarc.ucla.edu/spss/faq/what-does-cronbachs-alpha-mean/. Accessed 30 Apr. 2025.

 

13. Varghese, George, and Lakshmi Viswanathan. “Financial Inclusion: Opportunities, Issues and Challenges.” Theoretical Economics Letters, vol. 08, no. 11, 2018, pp. 1935–1942, www.scirp.org/html/1-1501523_86118.htm, https://doi.org/10.4236/tel.2018.811126. Accessed 25 Apr. 2025.

 

14. World Bank Group. “Overview.” World Bank, 2021, www.worldbank.org/en/topic/financialinclusion/overview. Accessed 29 Apr. 2025.

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