68% of Nigerians don’t trust the CBN to safeguard their e-Naira

The Issue

On Monday, October 25, 2021, the Nigerian government unveiled the first digital currency on the African continent – the e-Naira. The project, which has been in development for 3 years, was unveiled at the State House by President Muhammadu Buhari to loud cheers and hopeful speeches – the President’s especially.

In his speech, he mentioned that the e-Naira would increase remittances, foster cross-border trade, improve financial inclusion, and enable the government to make welfare payments more easily.

In addition, he said the adoption of a Central Bank Digital Currency (CBDC) could improve economic activities and increase Nigeria’s GDP by $29bn over the next 10 years.

But hopeful speeches and economic indices alone do not make for a great unveiling of the e-Naira or anything else that requires public goodwill to take off — that includes your brand.

With the app that gives access to the e-Naira – called Speed Wallet, having a 3 out of 5-star rating on Google Play Store, and a 2.1 out of 5-star rating on Apple’s App Store, it can be surmised that this hope is not shared by a majority of Nigerians.

The Question

With the e-Naira unveiling, Nigeria has joined a growing list of countries scrambling to catch up with the digital currency revolution ushered in by cryptocurrencies. Currently, 14 other countries including South Korea, China and Sweden are in the pilot stage of deploying their CBDC. The digital revolution doesn’t stop there either, with a total of 81 countries in other stages of developing their own CBDC.

There are a number of benefits listed globally in argument for CBDCs as a possible replacement for cryptocurrencies which are decentralised and impossible to regulate and control.

Its cost-efficiency trumps that of physical cash, its traceability will reduce fraud and other illicit activities, and it promises to help grant the unbanked easier access to cash. Yet the e-Naira carries with it all the baggage of the Naira in addition to the ill-will the government suffers from a massive youth population that has little trust in it.

For one the e-Naira is pegged to the physical Naira in CBN’s custody and its value will continue to fluctuate against the dollar same as always. Yet in its own way it may make everyday Naira transactions easier within and outside the country. The claim about increasing cross-border trade is not lightly made. Low-cost digital payment will incentivise markets from Aba to Cotonou to eventually embrace the e-Naira.

In the meantime, where China’s digital yuan’s pilot program has 7 million individual digital wallets and 1 million company wallets using the digital yuan, with transactions totaling $5.3 billion made from the trials, according to Business Insider, Nigeria’s e-Naira is struggling to take off. With just 4400+ ratings on Google Play, and a tonne of bad reviews, with even less engagement, the app too isn’t faring well just like the concept of the CBDC.

Nigerians are not averse to innovation, as their embracing of crypto has shown. The country is second in crypto trading after the US. So why the cold feet?

On February 5, CBN issued a directive instructing all financial institutions to stop the facilitation of all transactions involving cryptocurrencies. The ‘crypto ban’ was widely seen as the apex bank’s way of ushering in the e-Naira, and a teaming population of youth who are keen on crypto may have harboured a lot of resentment for the digital currency since then — well before it launched its pilot phase. Yet, China had done the same when it made tighter laws in May 2021 banning fintech companies from offering services around account openings, registration, trading, clearing and settlement to crypto platforms, effectively shutting down crypto. And the response wasn’t similar perhaps because the issues surrounding the ban are nothing like Nigeria’s, whose ban is also seen by the population as a blatant grab for control following the #EndSARS protest that was largely financed with crypto donation.

Is it a matter of bad communication, lack of trust in government institutions, poor execution, or just apathy to the currency’s historical volatility?

All of these could be instructive for not just the government but also private institutions seeking to introduce what they believe to be a revolutionary product.

What the streets are saying

The truth is as complex as you imagine, but also largely predictably so. 

In a Culture Intelligence from RED survey seeking to establish what is behind the cold feet of Nigerians in embracing the e-Naira, lack of trust leads with 61% of our 20-35 years old respondents being deeply distrustful of the Nigerian government generally. 68% can’t trust the government to secure the Naira enough, fearing that the e-Naira only just opens them further to online fraud, a stance that is counter to the promise of the apex bank that the e-Naira will be very safe because each Naira is unique and traceable.

The resentment we suspected also proved true, with 37.5% of respondents saying they wouldn’t use the e-Naira after the government banned crypto.

But there is another concern which came in at 6.3% of respondents. A concern for the strength – or lack thereof – of the Naira as a currency. This group of respondents feels that because the purchasing power of the Naira is so weak, introducing e-Naira that is the same as the fiat currency on bank apps, which have remained the backbone of e-payments in the country, is like a dog chasing its own tail.

On whether they will consider using the CBDC, 52.2% of respondents say an unequivocal no, with 39.1% sticking with maybe, while a paltry 8.7% say they will.

The work of the government can be said to cut out for them when we look at the percentage of people who said they will reconsider their stance on not using the e-Naira if the government works on trust-building with them – a whopping 70% of respondents. Yet it will take more than that because 10% still think the app interface is a deal-breaker, while another 10% insist unless the e-Naira promises more stability there is no point using it when they can just use their bank apps to make e-payments.

The digital currency revolution is not stopping any time soon as more countries join in, with some like El-Salvador going as far as embracing crypto as a legal tender, yet the future of CBDCs will rely a lot on the reputation of governments from Nigeria to Sweden.

Governments with a history of human rights violations and eroded trust like Nigeria will have to work hard to regain some trust from the population for their CBDCs to fully take off. But more than that, they will need to also make their offering worthwhile. What you are offering is as important as your reputation as the offerer. Do you have your audiences’ trust?