On Tuesday, Bloomberg reported that the value of Nigeria’s digital currency (eNaira) transactions jumped 63% year-on-year as the amount of cash in circulation has been recently cut to a third. Last year, the government began replacing old banknotes to reduce cash hoarding, black market activity and counterfeiting. Yet cash payments still make up almost 90% of Nigeria’s informal economy. As the country’s cash crunch may soon end, will Nigeria be able to sustain the increased adoption of its central bank’s digital currency (CBDC)?
In October 2021, the Central Bank of Nigeria (CBN) became one of the first to launch a large-scale CBDC pilot, the eNaira. Since then, the value of digital currency transactions in Nigeria has risen steadily to almost 22 billion naira ($47.7 million), according to Bloomberg, with more than 13 million e-wallets opened in the past six months alone. By contrast, the amount of cash in circulation has dropped from nearly 3.3 trillion naira ($7.1 billion) in December 2022 to less than 1 trillion naira ($2.1 billion) in February 2023, according to the latest CBN statistics.
CBN Governor Godwin Emefiele argues that this has been part of a sustained effort to bring the informal economy under control and discourage people from circumventing the formal banking system.
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