Nigeria, the the densest African nations, are experiencing a severe shortage of cash and this shortage has increased the adoption rate of the CBDC, eNaira.
Nigeria is the first African country to launch a sovereign digital currency. After launch, the project experienced a low adoption rates from residents. But recent cash shortages due to new financial policies and cash withdrawal restrictions have forced citizens to use digital solutions.
eNaira Now Gaining Relevance
Godwin Sorethe governor of CBN Nigeria, stated that CBN printed more than 10 billion eNaira, and nearly 3.4 billion are in circulation. In addition, the Nigerian government is pushing the adoption of this digital currency, it is used for payments under the Nigerian social scheme. This scheme is for poor Nigerians and has donated 4 million new wallets.
Emefiele is bullish on digital currency, stating that it has become the preferred electronic payment channel for financial inclusion. It is also a social intervention plan in the Nigerian economy.
Adesoji Solanke, Nigerian and Director at Renaissance Capital, shares his thoughts on eNaira. He said that while the government wants to increase adoption from citizens, the channels are limited. He believes the main challenge is the requirement because users must have a smart device and an internet connection.
Amount of smartphone users in Nigeria is likely to exceed 140 million by 2025. A rough estimate of Nigerian smartphone users is between 25 and 40 million.
Solanke said most of the people receiving the transfers are poor and may challenge the scheme. He believes that smart devices and internet connection may be valuable for this category of people.
Nigeria and its Demonetization Policy
The Governor of CBN Nigeria, Godwin Emefiele, declare that eNaira transactions are on the rise. He highlighted a 63% increase to 22 billion Naira ($47.7 million) in transactions since launch.
Central Bank of Nigeria Communique No. 147 of the Monetary Policy Committee Meeting Held Monday 20 and Tuesday 21 March 2023…https://t.co/03BXD6vrjG pic.twitter.com/LbW3y7u706
– Central Bank of Nigeria (@cenbank) March 21, 2023
The recent demonetization policy has reduced fiat currency in circulation in the country. The amount of circulation has decreased to 1 trillion Naira from the previous value of 3.2 trillion Naira in September 2022. Currently, the CBDC wallet has increased from October 2022 to 13 million, 12 times higher than the previous value.
Nigeria’s informal economy and trade depend on cash for around 90% of transactions and tthe CBN’s new monetary policy that triggered it widespread criticism in some quarters. The central bank started the exchange of cash for the old denominations of 200, 500, and 1,000 Naira.
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Due to widespread protests and chaos, the Supreme Court of Nigeria decided to keep the old and new notes until December 2023. In Nigeria, digital currency is a new concept, with rural missing important information. It will take more time to record mass adoption.
Also, before ban on cryptocurrencies in Nigeria may have canceled the entire digital currency adoption process. Despite the relative growth in eNaira, a lot of sensitization is needed, especially among the uneducated.
On the bright side, the infrastructure framework for eNaira is slowly falling apart. according to ReutersFlutterwave, a payment portal, added eNaira CBDC as a payment option on its platform last year.
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