In a significant move to accelerate the adoption of eNaira, Nigeria’s digital currency, the Central Bank of Nigeria (CBN) has entered into a Memorandum of Understanding with Gluwa, a blockchain firm. The partnership, announced on Thursday, focuses on leveraging blockchain technology to enhance the technical capabilities of eNaira and drive its increased usage.
Strengthening eNaira Through Blockchain Innovation
Gluwa, in its announcement, revealed that the collaboration entails utilizing blockchain technology to fortify the technical infrastructure of eNaira. The company plans to onboard millions of Nigerians by implementing its Credal technology, aiming to establish credit reputations for eNaira users. This innovative approach is expected to play a pivotal role in boosting the adoption of eNaira.
The core objective of the partnership is to harness the power of blockchain technology for enhancing financial inclusion, improving eNaira functionality, and fostering financial innovation. Gluwa’s Credal blockchain innovation will be integrated directly with eNaira, facilitating a seamless connection and providing users with enhanced capabilities.
Driving Adoption through Credit Reputations
Gluwa emphasized its goal of onboarding millions of Nigerians and assisting them in building secure, on-chain credit reputations. This mechanism is seen as a valuable strategy to drive the adoption of the Central Bank’s digital currency. Additionally, the integration of Credal with eNaira is expected to simplify processes such as loan origination, tracking, settlement, and credit scoring for local fintech lenders.
Challenges in eNaira Adoption
Despite the introduction of eNaira in October 2021 with the objectives of boosting financial inclusion, facilitating cross-border transactions, and enhancing diaspora remittances, adoption has faced challenges over the past two years. A report titled “Nigeria’s eNaira, One Year After” by the International Monetary Fund revealed disappointingly low adoption rates.
According to the report, approximately 98.5% of eNaira wallets downloaded after the digital currency’s launch have been abandoned, with only 1.5% actively used for transactions. In response to these challenges, stakeholders recommended collaboration between the Central Bank and fintech companies, emphasizing the crucial role of such partnerships in driving eNaira adoption.
Addressing Adoption Challenges Through Strategic Partnerships
The partnership between the Central Bank of Nigeria and Gluwa is a strategic response to the slow adoption of eNaira. By incorporating Gluwa’s expertise and Credal technology, the collaboration aims to overcome existing challenges and promote a more widespread usage of eNaira. This approach aligns with the recommendations from stakeholders, emphasizing the importance of fostering collaboration between regulatory bodies and fintech entities to drive innovation and adoption in the digital currency space.