Nigeria’s CBN upgrades eNaira with NFC for contactless payments.

Nigeria's CBN upgrades eNaira with NFC for contactless payments.

The Growing Commitment to Central Bank Digital Currency in Nigeria

Image of the Central Bank of Nigeria’s building Image of the Central Bank of Nigeria’s building. Source: Daily Post.

Despite the former governor’s ousting nearly two months ago, the Central Bank of Nigeria (CBN) continues to display a commitment to its central bank digital currency (CBDC) project, showing no indications of abandoning it. The CBN has recently enhanced the CBDC mobile app by incorporating Near Field Communication (NFC) technology. This upgrade enables mobile devices and payment terminals to interact when in close proximity, facilitating convenient and contactless eNaira payments.

Previously, the CBDC mobile app included QR codes, but the CBN emphasizes that the latest addition of NFC technology will play a crucial role in boosting the adoption rates for the CBDC. This commitment to innovative technology and enhancing the user experience is in line with the CBN’s vision.

Embracing the idea of utilizing cutting-edge technology, the CBN plans to equip the CBDC with programmability features. These programmability features can be employed to limit CBDC payments exclusively to designated government programs, effectively reducing the risk of fraud.

The programmability of the CBDC opens up a wide range of possibilities. For example, funds could be allocated specifically to farmers, enabling them to acquire tools for their trade. By implementing this approach, the funds transferred into their eNaira wallet become non-divertible for any unrelated purposes, ensuring that the intended use is strictly adhered to. This programmability feature strengthens the accountability and transparency of the CBDC.

Implementing a CBDC offers numerous advantages for retail users in Nigeria. It mitigates settlement risks and enables rapid transaction processing. The eNaira aims to address the issue of financial inclusion, where many individuals in Nigeria still lack access to traditional banking services. By adopting CBDCs, Nigeria is taking a pioneering role, providing valuable insights for various economic players and entities to learn from the country’s experience.

Nigeria launched its eNaira in 2021, joining an exclusive group of countries with a CBDC offering. However, adoption rates have fallen below expectations, prompting the central bank to explore several options to drive usage. One strategy was rolling out use cases in the transport sectors while including USSD functionality in the offering. Despite these efforts, former CBN Governor Godwin Emefiele blamed commercial banks for stifling eNaira’s growth in favor of their profitability.

In conclusion, the Central Bank of Nigeria’s commitment to its CBDC project is evident through its incorporation of NFC technology and plans for programmability features. By using innovative technology and focusing on user experience, the CBN is paving the way for increased adoption rates of the eNaira. The programmability aspect provides enhanced security and targeted fund allocation, preventing misuse and fraud. Nigeria’s role as a pioneer in CBDC adoption offers valuable lessons for other countries and economic entities. Despite initial challenges, the CBN remains determined to drive the usage and benefits of the eNaira in Nigeria’s financial landscape.