Nigeria’s central bank launched its own digital currency, the eNaira, in 2021, and nearly 18 months later, the CBDC is seeing increased adoption in the country. The acute cash shortage in Nigeria is due to the central bank’s decision to replace older banknotes with bigger denominations, which has caused severe shortages in national fiat reserves. In a country where cash accounts for about 90% of transactions, the lack of physical cash has forced Nigerians to turn to the eNaira.
According to a recent Bloomberg report, the value of eNaira transactions has increased by 63% to 22 billion nairas ($47.7 million), indicating a growing adoption of the CBDC. Furthermore, the total number of eNaira wallets has grown more than 12 times compared to October 2022, and is currently at 13 million, as reported by Godwin Emefiele, the governor of the Central Bank of Nigeria.
The demonetization, which reduced the circulating cash supply from 3.2 trillion nairas to 1 trillion nairas, prompted Nigeria to mint over 10 billion eNairas to compensate for the decline. The use of eNaira payouts in government initiatives and social schemes has also contributed to the increase in CBDC adoption.
For developing countries like Nigeria, CBDCs present a way to overcome challenges presented by the fiat economy, including reducing operating costs and strengthening Anti-Money Laundering initiatives. The eNaira, in particular, has emerged as the electronic payment channel of choice for financial inclusion and executing social interventions, according to Emefiele.
In addition to the increased adoption of the eNaira, Nigerians have also been presented with another option for procuring cryptocurrencies. MetaMask’s parent firm ConsenSys recently announced a new MoonPay integration, which allows Nigerians to purchase crypto via bank transfers. This new feature is available within the MetaMask mobile and Portfolio DApp, significantly simplifying buying crypto without using credit or debit cards in Nigeria.
It is clear that the adoption of CBDCs like the eNaira in Nigeria is becoming increasingly important in the face of cash shortages and other economic challenges. The use of digital currencies presents a viable solution to revamp the fiat capabilities of developing nations and to provide greater financial inclusion to citizens. As such, it will be interesting to see how the adoption of eNaira and other CBDCs continues to evolve in Nigeria and beyond.