Consumer’s Technology Readiness and Adoption of Central Bank Digital Currency in Nigeria

Dr. Iriobe Ofunre C., Department of Business and Marketing Studies, Redeemer’s University, Nigeria
iriobeo@run.edu.ng

Dr. Iriobe Grace O, Department of Finance, Redeemer’s University, Nigeria
iriobeg@run.edu.ng

Dr. Agada Solomon, Department of Business and Marketing Studies, Redeemer’s University, Nigeria
agadas@run.edu.ng

The recent redesign of Nigeria’s currency, the Naira, resulted in cash shortages, significantly impacting consumers. Despite the Central Bank of Nigeria’s (CBN) efforts to promote the adoption of the e-Naira as a means for transactions, the digital currency did not achieve the anticipated success. This was attributed to consumers’ habits of utilising bank transfers and debit cards for transactions, rendering the adoption of digital currency less attractive than initially envisaged. Although the majority of Nigerian consumers possess smartphones and have reasonable internet accessibility, policymakers have overlooked their preparedness for integrating the e-Naira into their transactional practices. This study offered policy recommendations aimed at enhancing citizens’ readiness to embrace Central Bank Digital Currency (CBDC) for their day-to-day transactions. It advocates for the refinement of e-Naira features, mitigation of infrastructural deficiencies, and the strategic deployment of targeted influencer campaigns within communities to augment its adoption prospects among Nigerians.

Introduction

Central bank digital currencies (CBDCs) are emerging as a transformative force in the global financial landscape. While developed nations have been exploring the potential benefits and risks of CBDC, developing countries like Nigeria are keenly interested in adopting CBDC to address unique economic challenges such as reaching the unbanked and bringing in more people into the formal financial system.¹

CBDCs are digital forms of a country’s official currency issued and regulated by the country’s central bank. Unlike cryptocurrencies, CBDCs are backed by the full faith and credit of the government, making them a trusted and stable digital currency.² CBDCs hold significant promise, including faster and cheaper cross-border transactions, improved financial inclusion, and enhanced monetary policy tools.

Recently, Nigeria had experienced innovations aimed at increasing financial inclusion in the economy, and some of these financial innovations were introduced after the COVID-19 crisis. For instance, the introduction of the cashless policy in 2012, the licencing of 17 financial technology (FinTech) companies in 2023 as mobile money operators, lifting of the ban on cryptocurrency transactions through banks and the introduction of the eNaira in 2022, which is the central bank digital currency of Nigeria. The aspiration is to increase access to formal financial services for the population and provide better options for payment and increase consumption. The pilot scheme in Nigeria was launched to increase access to traditional banking services among citizens, lower transaction costs, and achieve currency stability. Achieving these aims will improve economic growth and financial inclusion by providing a secure, inclusive, and efficient digital payment system.

Nigeria’s economic growth has been constrained by COVID-19, extreme poverty, escalating public debt/debt risk, sluggish expansion of the labor market, and the swelling labor force. These challenges have further marginalized individuals from accessing the traditional banking system. Nigeria has low rates of financial inclusion³, and CBDC could help to bridge the financial inclusion gap by providing a digital payment system that is accessible to everyone. However, its failure to appeal to Nigerian consumers who have access to mobile financial services contests Nigerians’ readiness to adopt the CBDC.

Statement of Problem

When the Central Bank of Nigeria redesigned the Naira, there was a sudden shortage of cash due to poor planning and hasty execution of the policy. Consumers were unable to complete purchases due to a lack of cash, compounded by limited access to digital payment methods for many of them. It was expected that users would switch to digital currency for their transactions but that was not the case. Policy makers also assumed that the access to smart phones will influence more people to adopt digital currency as has been observed among farmers in Sub-Saharan Africa. Despite CBN’s effort to sensitise citizens to use the e-Naira for their daily purchases, consumers were reluctant to accept the technology for their transaction needs for reasons such as poor security, lack of privacy, poor access to financial information,⁴and financial literacy among others has been given as cause of the slow acceptance⁵. These arguments are not tenable, as the same consumers utilise alternative electronic payment methods such as receiving and sending funds through their bank’s application. One aspect policy-makers have not considered is the technological readiness of consumers to use the e-Naira. Although the use of mobile and internet technology has grown over the years in Nigeria⁶, which could signify readiness, the same cannot be said about financial technology because of emotional and psychological attachment to finances.

The e-Naira boasts user-friendly features and enhanced security compared to cash and it exhibits similar attributes with existing electronic payment systems. Despite Nigerian consumers being technology enthusiast and optimist, they are reluctant to embrace CBDC for transactions. Further study is needed to understand the reluctance to adopt CBDC. Moreover, research on social influence and e-Naira acceptance in Nigeria especially regarding the role of early adopters in promoting e-Naira acceptance among their peers has not been adequately studied.

This study investigated consumers’ technology readiness (TR) to adopt CBDC in Nigeria using regression model to test the relationship. The findings of this study will provide valuable insights on how consumers can be influenced to adopt CBDC in Nigeria and also provide valuable guidance for policy-makers, Central banks, and financial institutions in Africa as they navigate the path toward a digital future.

Analysis of the Problem

Financial inclusion is the accessibility and availability of financial services to all segments of the population, particularly those who are not captured by the formal financial system. The number of a country’s population who are included in the formal financial system influences economic development,⁷hence it is importance in literature. users. Over the years, developing countries have struggled with providing access to appropriate financial products and services to citizens irrespective of their status. While there are many financial products in Nigeria, policy-makers have not paid attention to products that focuses on easing buying and selling in the country. One major barrier to financial inclusion is the high illiteracy rate of citizens⁸, especially in the Northern part of Nigeria,⁹because there is a possibility of financially excluding this demography if the financial products are complex. This demands creating financial products within consumers literacy level. The advent of new technology has facilitated the inclusion of more people in the formal financial system, particularly in regions where traditional banks are unable to provide financial services¹⁰ This led to the introduction of CBDC by the Central Bank of Nigeria.

Recent discussions surrounding e-Naira primarily revolved around assessing the advantages and drawbacks of this financial product, others have considered the influence of the policy on usage of financial services¹¹and the adoption of cryptocurrency.¹²In discussing some of the challenges of CBDC in developing countries, some factors such as access to information, users’ security/privacy, financial literacy, and users’ intention to adoption new technology for their financial transactions have featured prominently.¹³ Although, these factors have been considered individually, and where they all feature simultaneously, the authors have merely described how these elements affect the adoption of e-Naira. However, there is no sufficient empirical evidence to test consumers’ technology readiness to adopt and use the e-Naira.

The CBN has communicated through various medium how e-Naira can improve financial transactions, security, and accessibility for Nigerian consumers especially those in rural areas. Arti Gaur and Sanju Verma, scholars on e-payment systems from the Department of Business Administration at Chaudhary Devi Lal University, Sirsa, India¹⁴argued that e-payment systems should be user-friendly, secured, and accessible to a wide range of users, considering factors like digital literacy and infrastructure. Unfortunately, where all the measures are ensured, there is no guarantee that users will be ready to accept new financial technology. Conducting empirical studies to gauge public perceptions and readiness to adopt CBDCs can help central banks better understand how to formulate policies around the digital currency, aligning with the Technology Acceptance Model (TAM) principles. The Technology Acceptance Model (TAM) is a theoretical framework developed to understand and predict how users accept and use new information technology.

Technology readiness is people’s predisposition to embrace and use new technologies to accomplish goals in life and at work. When approaching new technologies, people tend to exhibit four different attitudes that show their readiness to use a technology.¹⁵These attitudes are optimism, innovativeness, discomfort and insecurity. optimistism and innovativeness, drives people to embrace novelty, while others experience discomfort and insecurity, making them hesitant to adopt new technology. Optimism reflects an individual’s positive attitude towards technology¹⁶ They are more likely to adopt new financial tools like e-Naira and are not likely to be discouraged by initial setbacks of the technology. Innovativeness are users who are naturally drawn to novel ideas and enjoy experimenting with new things. They are early adopters of new financial technologies. Discomfort represents users who are apprehensive or show traits of anxiety towards new technologies while insecurity are individuals who worry about the potential risks and uncertainties associated with new technologies.

One of the observations about this construct is that they are not indicators of the competence of users.¹⁷ Users may have a positive disposition towards a new technology but may not be competent to use it. Also, users can be competent, but may not be favourably disposed towards such a technology.

Beside the individuals, their social circle plays an important role in influencing their adoption of new technology. Social influence is the extent to which users’ attitude, beliefs or behaviour are influenced by the actions or presence of others. In relation to e-Naira, social influence could be conceptualised as the influence of reference groups, family, opinionated leaders, friends, and colleagues on the adoption of CBDC by users in Nigeria. The interaction of users of new technology with people of significance in their lives, can influence their decision to adopt the technology.¹⁸The selection of social influence as a key determinant of the behavioural intention is built on prior literature which has identified its influence in adopting new financial technology. ¹⁹²⁰²¹

Policy Recommendation

In light of the current challenges surrounding the acceptance of the e-Naira, a comprehensive policy is recommended to demonstrate the seamless integration of Central Bank Digital Currency (CBDC) into daily consumer transactions, with a specific focus on rural regions. The objective of this policy is to address existing barriers hindering widespread adoption and to position the e-Naira as a distinctive and user-friendly digital currency. To achieve this, it is recommended that:

The CBN of Nigeria should launch an extensive educational campaign to enlighten the public, especially those in rural areas, about the benefits and functionalities of the e-Naira. This should include workshops, seminars, and informational materials aimed at fostering a deeper understanding of the digital currency. This educational campaign should highlight the optimistic and innovative aspects of the e-Naira. Transparent communication can further enhance user trust and confidence in the digital currency. In addition to that, incentive programs should be implemented to encourage the use of the e-Naira. This may involve offering discounts, cashback, or other rewards for transactions conducted using the digital currency. Such programs could stimulate interest and promote a positive perception among users.
In addition to financial education, there is a need to emphasize developing financial products within the users’ literacy level. The focus on CBDC should be basic transaction activities that consumers can easily relate to and use, for instance, deposit, paymen,t and savings.
One of the reasons why consumers were not eager to accept e-Naira was the lack of uniqueness. The e-Naira has no significant outstanding features that differentiates it from other existing electronic forms of payment in Nigeria. The e-Naira depends on the internet and a smart phone to be fully functional, moreover, there are no guarantees that the same challenges consumers face with electronic transfer will not resurface. For consumers to consider any technology useful, it is recommended that its features must be competitive and unique compared to existing technology.
The government should prioritize the enhancement of internet infrastructure in underserved areas. They should collaborate with relevant stakeholders, including telecommunication companies and other government agencies, to expand connectivity and provide cutting edge solutions that will integrate customer preferences in the development of the e-Naira. There is also a need to introduce measures to enable offline transactions for the e-Naira. This could involve developing a secure offline mode that allows users to conduct transactions without requiring constant internet access, similar to the functionality of successful digital currencies in other regions such as Mpesa in East Africa.
One of the recommendations for CBN from this study is to strategically engage with influential individuals within the rural community to encourage the adoption of the e-Naira. Their endorsement can potentially catalyse a positive shift in social influence dynamics, fostering greater acceptance among community members. Often, members of the public are waiting for the recommendations from influential figures to accept new technologies.
Finally, addressing the infrastructure deficit in Nigeria requires a multifaceted approach. For people to accept the e-Naira, policymakers should advocate for increased investment in essential infrastructure both from the government and players in the private sector, particularly in areas such as electricity and internet facilities. This will create a conducive environment for digital currency adoption. This will require collaborations between the public and private sectors to accelerate infrastructure development. Public-private partnerships can leverage resources and expertise to address gaps efficiently. Furthermore, initiatives that extend infrastructure development to rural areas should be prioritised, ensuring that the benefits of facilitating conditions reach a broader population. There should also be a robust system for monitoring and evaluating the effectiveness of infrastructure development initiatives. Regular assessments will enable policymakers to adjust strategies based on evolving needs.

Conclusion

Assessing the readiness of users to accept a new technology in the consumer payment system is critical in determining their financial inclusion. As the digital finance landscape continues to evolve, the findings of this study provide a guideline for policymakers to foster the successful adoption of digital currencies. The study suggests that policymakers enhance the features of eNaira, address infrastructural limitations, and potentially leverage targeted campaigns to increase its chances of adoption by Nigerians. By understanding the key factors influencing individual decisions, policymakers and developers can tailor strategies to promote broader e-Naira usage and achieve its intended aims.

References

Adeleke, Richard, and Opeyemi Alabede. “Understanding the patterns and correlates of financial inclusion in Nigeria.” GeoJournal (2021): 1-18.

Ahmad, Ahmad Hassan, Christopher Green, and Fei Jiang. “Mobile money, financial inclusion and development: A review with reference to African experience.” Journal of economic surveys 34, no. 4 (2020): 753-792.

Alalwan, Ali Abdallah, Yogesh K. Dwivedi, Nripendra PP Rana, and Michael D. Williams. “Consumer adoption of mobile banking in Jordan: Examining the role of usefulness, ease of use, perceived risk and self-efficacy.” Journal of Enterprise Information Management 29, no. 1 (2016): 118-139.

Albayati, Hayder, Suk Kyoung Kim, and Jae Jeung Rho. “Accepting financial transactions using blockchain technology and cryptocurrency: A customer perspective approach.” Technology in Society 62 (2020): 101320.

Ayegbeni, Ulokoaga Daniel. “Agent banking and financial inclusion in Nigeria: Challenges and prospects.” International Journal of Banking and Finance Research 6, no. 1 (2020): 32-42.

Chen, Sally, Tirupam Goel, Han Qiu, and Ilhyock Shim. “CBDCs in emerging market economies.” BIS Papers (2022). https://doi.org/10.2139/ssrn.4085690.

Cruz-Cárdenas, Jorge, Jorge Guadalupe-Lanas, Carlos Ramos-Galarza, and Andrés Palacio-Fierro. “Drivers of technology readiness and motivations for consumption in explaining the tendency of consumers to use technology-based services.” Journal of Business Research 122 (2021): 217-225.

Fedorko, Igor, Richard Fedorko, Beata Gavurova, and Radovan Bačík. “Social media in the context of technology acceptance model.” Entrepreneurship and Sustainability Issues 9, no. 1 (2021): 519.

Gaur, Arti, and Sanju Verma. “USER’S ADOPTION OF E-PAYMENT SYSTEM IN HARYANA.” EPRA International Journal of Research and Development (IJRD) 8, no. 2 (2023): 217-224.

Lannquist, Ashley, and Brandon Tan. “Central Bank Digital Currency’s Role in Promoting Financial Inclusion.” FinTech Notes 2023, no. 011 (2023).

Luu, Hiep Ngoc, Dinh Dinh Do, Thanh Pham, Viet Xuan Ho, and Quynh-Anh Dinh. “Cultural values and the adoption of central bank digital currency.” Applied Economics Letters 30, no. 15 (2023): 2024-2029.

Ogbuabor, Jonathan E., G. O. Eigbiremolen, A. Orji, C. O. Manasseh, and F. N. Onuigbo. “ICT and financial inclusion in Nigeria: An overview of current challenges and policy options.” Nigerian Journal of Banking and Finance 12, no. 1 (2020): 90-96.

Parasuraman, Ananthanarayanan, and Charles L. Colby. “An updated and streamlined technology readiness index: TRI 2.0.” Journal of service research 18, no. 1 (2015): 59-74.

Parasuraman, Ananthanarayanan. “Technology Readiness Index (TRI) a multiple-item scale to measure readiness to embrace new technologies.” Journal of service research 2, no. 4 (2000): 307-320.

Platt, Moritz, Stephen Ojeka, Andreea-Elena Drăgnoiu, Oserere Ejemen Ibelegbu, Francesco Pierangeli, Johannes Sedlmeir, and Zixin Wang. “Energy demand unawareness and the popularity of Bitcoin: evidence from Nigeria.” Oxford Open Energy 2 (2023): oiad012.

Rahardjo, Budi, Bintang Mukhammad Burhanudin Akbar, and Ivo Novitaningtyas. “The analysis of intention and use of financial technology.” Journal of Accounting and Strategic Finance 3, no. 1 (2020): 88-102.

Sunday, Okoliko, and Attah James. “Influence of Central Bank of Nigeria Digital Currency on Financial Inclusion of Lecturers and Students of the Three Public Colleges of Education in Kano State.” American Journal of Finance 8, no. 2 (2023): 30-41.

Ward, Orla, and Sabrina Rochemont. “Understanding central bank digital currencies (CBDC).” Institute and Faculty of Actuaries (2019): 1-52.

Xia, Huosong, Yangmei Gao, and Justin Zuopeng Zhang. “Understanding the adoption context of China’s digital curren

Wayne, T., Soetan, T., Bajepade, G., & Mogaji, E. (2020). Technologies for financial inclusion in Nigeria. Wayne, T., Soetan, T., Bajepade, G & Mogaji, E., Technologies for Financial Inclusion in Nigeria. Research Agenda Working Papers, 2020(4), 40-56.

Please Share this Article