Nearly two years after its launch, the Nigerian Central Bank Digital Currency (CBDC), the eNaira, is finally showing a sign of life, thanks to the fiat redesign policy, which led to a cash crunch in the nation.
According to a report by Bloomberg earlier today, Nigerians are now faced with no option but to embrace the earlier ‘cast away’ eNaira. And this has been reflected in a reported surge in the number of transactions executed and wallets opened.
The Bloomberg report
The report says that in the country where cash accounts for about 90% of transactions, eNaira transactions increased 63% to 22 billion Naira ($47.7 million) since its introduction.
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Additionally, the number of eNaira wallets increased by more than 12 times to 13 million compared with the data obtainable in October 2022, citing data announced by the Central Bank of Nigeria’s Governor, Godwin Emefiele, on Tuesday.
According to Emefiele, who spoke to reporters at a monetary policy committee press conference in Abuja, the country’s capital, fiat currency in circulation in thE country has dropped to around 1 trillion Naira from 3.2 trillion Naira in September 2022.
To bridge that deficit, Godwin Emefiele said more than 10 billion Naira of the CBDC has been minted so far, and about 3.4 billion Naira is in circulation. He further attributed the adoption of the eNaira to a governmental social scheme which paid ‘poor Nigerians’ with the digital currency. The scheme contributed 4 million new wallets to the total, Emefiele said.
“The eNaira has emerged as the electronic payment channel of choice for financial inclusion and executing social interventions”
Godwin Emefiele.
How did we get here?
In a bid to fight rising inflation and insecurity, the Nigeria’s apex bank decided to replace older 200, 500 and 1000 currency with new notes within a few weeks. However, the decision, the short deadline, and its implementation process are now being questioned.
Since last December, the decision has been accompanied by an acute cash shortage crisis and economic hardship, which implied that the initiative was an ill-advised one at worst and not properly planned and managed at best.
The Supreme Court of Nigeria eventually overturned the decision, stating that the old notes should remain legal tender until the end of the year. Despite the ruling weeks ago, cash scarcity (new and old notes) continue to plague the country
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Although the CBN Governor claims the lack of physical cash has forced Nigerians to scramble for alternative payment options to use the eNaira, there is no ample evidence to back that assertion as most citizens still do not find the digital currency appealing.
What next?
Although Nigerians were among the first countries to acknowledge the importance of CBDC in a bid to encourage a digital economy, trends have shown that the idea is yet to fully kick off almost two years after its launch.
Recall that we reported in February that the CBN was in talks with new “technology partners” to develop a new and improved system to manage the government-backed digital currency. The report said the CBN wants to “develop its own software for the digital currency so that it can keep full control of the effort” which means the new software for the eNaira will be created to allow the CBN to have complete control over the initiative.
All these show that the government’s financial system wants to compel the citizen to embrace an initiative that does not look interesting to them. The fact remains that this wouldn’t reduce the scepticism Nigerians have about the project. The eNaira offers little or no novel alternative to what is already attainable. It does not address cross-border transactions. Also, it defeats the essence of blockchain technology by being controlled by a centralised authority.
The only way to truly foster widespread adoption of the eNaira is to find a way to make the eNaira more attractive to everyday Nigerians, especially retail business owners, with a considerable number of them still oblivious to the existence of the eNaira and its offerings.
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