In 2021, Nigeria became the first nation on the African continent and the second in the world to launch a central bank digital currency (CBDC), naming it; the e-Naira. The promise? More financial inclusion and leap into the future. However, three years later, it is only adopted by 854,512 Nigerians as at 2024  in a country of more than 200 million people and actively used by less than 0.5 percent of Nigerians. Why did this revolutionary innovation fail to gain popularity? Because the e-Naira failed to gain public trust or adoption due to poor rollout, limited use cases, and centralization by the Central Bank of Nigeria.

Indonesia, which is now preparing to issue its own CBDC, the Digital Rupiah, is at the same fork in the road. Will Indonesians embrace it? Or will it end up as yet another state-sponsored app that nobody wants? The case of Nigeria can serve as a very important caution: technology alone cannot guarantee success in a space lacking trust, integration, and very clear incentives. Indonesia has a great opportunity to get this right; if it listens.

Why the Digital Rupiah Requires More Than Technology

Indonesia’s digital economy is expanding at a very fast rate, with over 200 million internet users along with a thriving fintech sector that is transforming lending and payments in the South Asia's biggest economy. Bank Indonesia is in the process of developing a Digital Rupiah, to modernize monetary policy, decrease cash dependency and also enhance financial inclusion. On paper, it is a very timely innovation: a large number of urban consumers already use cashless payments dominated by e-wallets such as GoPay, OVO, and DANA with a transaction value of US$ 313.75 dollars in 2024 and expected to US$ 704 billion by 2030.

Yet, it is estimated that approximately 97 million Indonesians are either unbanked, or are working largely on cash-oriented informal sectors. To them, financial inclusion is not a technological attribute but a basic need.

Central bank digital currencies (CBDCs) are legal tenders issued by governments which hold a lot of real promise to bridge formal and informal economies.  However, the unsuccessful implementation of the e-Naira in Nigeria implies that there are more underlying risks. The e-Naira was poorly integrated with the existing fintech platforms, offered no clear advantage over mobile-money alternatives like O-pay and Moniepoint and was inadequately communicated to the public.

Indonesia and Nigeria share several critical socio-economic features: large mobile population 212 Million in Indonesia and 107 million in Nigeria, exceptionally large informal sector 59.31% and over 80 % respectively as at 2024 and a very high level of distrust towards state institutions. Indonesia therefore needs more than technical prowess to make its CBDC successful, and this is where trust-building, incentives, and the inclusion of the private sector needs to be prioritized.

A Digital Currency Is as Good as Its Adoption or Usage

To avert the failings of the Digital Rupiah, Indonesia needs to steer clear of the pitfalls of its Nigerian counterparts and focus on building trust, ease of use, and uptake instead of just making and launching a high-tech digital product. A digital currency only succeeds when people actually choose to use it. That would involve compatibility with already existing popular platforms, like GoPay or ShopeePay, as well as providing obvious, concrete advantages over the status quo.

Without this, the Digital Rupiah may well end up as a very costly but unused “digital white elephant" that fails to reach or be utilized by the majority of the population. Indonesia has a great potential to lead the Global South in digital finance, but only if it can earn the trust and also the engagement of its citizens.

What Indonesia Needs to do Differentially

The Indonesian CBDC project represents a historic opportunity for the country, provided that it does not concentrate on novelty over adoption. Nigeria’s e-Naira did not fail due to technological failings. Rather, it failed because the citizens saw little reason to adopt it as well as its inability to integrate with the various tools they already used daily. To avoid the same outcome, Bank Indonesia need to focus on three very essential areas:

1: Public Trust Is the First Building Block of Digital Currency

The fundamental weakness of the e-naira was its failure to gain trust among the citizens. A lot of Nigerians considered it as a possible tool of state surveillance or control. There are already similar suspicions in Indonesia, particularly in the rural areas, among informal workers as well as among even urban digital natives worried about data privacy.

Trust is something which has to be earned, not something assumed. Bank Indonesia should go beyond policy papers and initiate a full scale public information program on how the Digital Rupiah operates, how privacy is going to be safeguarded, and what the advantages of adoption are.

Open auditing, robust privacy measures and definite assurances of non-surveillance will play a very crucial role. As Professor Eswar Prasad of Cornell University notes, “Without the trust in the issuer, the technology is nothing”.

A CBDC cannot be successful in the deep shadows. If Indonesians do not believe it, they would not want to touch it.

2: Providing Real Incentives

Nigeria’s e-Naira fails to offer users with any incentive to migrate, particularly at a time when much simpler mobile money schemes were already in existence. Why would they want to change to something more complex?

Indonesia should avoid this by offering very strong meaningful incentives. These could be low transaction charges, cash back, and faster distribution of government transfers like BLT (direct aid) and food subsidies. An example could be the ability to get social benefits immediately, without a queue and intermediaries, which users can immediately recognize as a benefit.

In addition, the capability of offline-functioning would be a good way to access remote or underserved populations, a weakness in the implementation process in Nigeria, which increased the digital divide.

Although others estimate that incentives are unsustainable, the initial phase of the digital yuan pilot in China shows that it can be an effective way to stimulate adoption.

Incentives are not handouts but instead they constitute a group of specific activities which are tactically focused on initiating early trust and usages.

3: Prioritizing Collaboration Over Control

The central bank of Nigeria operated the e-Naira in isolation, excluding fintechs and offering a poor user experience. Comparatively, Indonesians have already been accustomed to the available digital wallets and will resist the idea of switching to a less comprehensive and unknown application.

Bank Indonesia needs to focus on connecting the Digital Rupiah with the available wallets and e-commerce providers, including Tokopedia and Shopee. This takes away the complications of adoption as it helps to meet the users where they are.

Although the risks of security are understandable, the experience of other nations proves that this can be addressed. Sweden and Singapore are very good examples of countries that employ tiered wallets, open APIs, and stringent licensing to strike the right balance between innovation and state regulation.

Therefore, collaboration does not imply loss of control; it implies staying relevant. Devoid of usability and integration, even the strictest state control will become irrelevant.

Conclusion

The Digital Rupiah can be an instrument to revolutionize the Indonesian financial system, as long as the strength strategy matches up to the ambition. Nigeria’s experience  indicates that adoption or trust cannot be achieved through only technology. Success depends a lot on credibility, accessibility, as well as integration into everyday life of users. Bank Indonesia must focus on communicating clearly with the public, provide valuable incentives, and cooperate with the private sector to provide a product that is indeed user-friendly. As Indonesia moves toward a cashless future, the critical question is not whether the government can issue a digital currency, but rather it is on whether society will accept and also use it.

The answer, thus, is not in the code, but in the confidence and trust of the people.