Last Tuesday, Bloomberg reported that the value of Nigeria’s CBDC, eNaira transactions jumped 63% year-on-year. Yet our local observers report quite a different story.
In a move that has since been declared invalid by the Nigerian Supreme Court, the Central Bank of Nigeria (CBN) announced in October 2022 the redesign of 200, 500, and 1000 naira notes, giving Nigerians three months to deposit old banknotes before they ceased to be legal tender.
The date for stopping the circulation of old notes was pushed back, first to February 10 and, after the Supreme Court ruling, until the end of the year.
The unavailability of new banknotes is causing chaos in the country where most of the population relies on cash for most daily and business transactions as there are few banking infrastructures in rural areas.
Trying to find ways to pay for food, school fees, and gas citizens have turned to digital finance platforms such as Opay, Palmpay, and Geegpa.
Everything but eNaira, the Central Bank’s Digital Currency (CBDC), launched on October of 2021. The eNaira is at the forefront of CBN's efforts to turn Nigeria into a cashless economy, but so far it failed to be adopted by the general population.
The CBN ruled out several campaigns for Nigerians to start using digital finance platforms to pay for goods and services but convincing Nigerians to use the currency will be more difficult than anticipated as its performance has been underwhelming even during the scarcity of cash in Nigeria.
Another reason for eNaira’s shortcomings is that its launch was followed by a ban on cryptocurrencies and the freezing of accounts that had transacted in crypto. Nigerian were amongst the first and most dedicated adopters of cryptocurrencies, the government ban on crypto ruined several lives and crippled multiple businesses.
So every move made by the CBN since the crypto ban has received heavy criticism and made eNaira unpopular amongst Nigerians.
The Central Bank of Nigeria seems to be getting more desperate by the day, recently it was reported it was reaching out to New York-based technology firm R3 in an attempt to develop a new system to run and manage its central bank's digital currency.
Whether such repressive and sharp actions or a slower Chinese eCNY approach will give better results will be the topic of our next Observations.