The African country, Nigeria, is currently facing a crisis after an acute cash shortage due to the adoption of a big fiat currency denomination. Nigeria going through the problem of inflation and order of replacing older notes with big denominations further added problems in the country.
The decision to demonetize the country has forced people to move towards central bank digital currency (CBDC). Nigeria launched its CBDC, eNaira, 18 months ago now becoming an alternative payment system for the people in times of demonetization.
They have decided to replace the currency of 100, 200, and 1000 in late 2022. This decision was taken to tackle rising inflation, excess cash, and corruption. Due to less cash available in the economy, Nigerians are shifting their focus on eNaira.
According to reports, after the announcement of older notes replacement the eNaira witnessed a growth of 63% to 22 billion nairas in its usability. Nigeria is currently the biggest economy in the African region and had around 3.2 trillion nairas in circulation in September 2022 but currently, the nairas in circulation is only 1 trillion nairas.
Physical currency controls 90% of total transactions in Nigeria’s informal economy. Godwin Emefiele, the governor of the central bank of Nigeria has informed that around 10 billion nairas minted so far and 3.4 billion nairas are in circulation.
Nigeria has witnessed growth in digital wallets by 12% since October 2022. The boom in the adoption of the eNaira can be looked as a positive step toward a digital economy. In the African region which is considered the most backward region in terms of technological advancements, the adoption of CBDC at a large scale can be fruitful in many ways. It can help the country to encounter serious problems like money laundering, terror funding, and monitoring of corruption.
Nigeria’s eNaira faced criticisms from experts when they claimed that over 99.5% of Nigerians refused to use the eNaira. Earlier reports claimed that the CBDC adoption was a very dark experiment in the country. In a time of currency shortage, eNaira emerged as an immediate relief for people and proved these claims wrong.