The Nigerian economy’s cash shortage has drastically altered the prospects of the central bank’s digital currency, eNaira, which had previously been struggling to achieve any notable utilization and acceptance in the country.
Godwin Emefiele, Governor for the Central Bank of Nigeria, reported on Tuesday, March 21 that, since its launch, eNaira transactions have seen an increase of 63%, totaling 22 billion nairas (equivalent to $47.7 million). Furthermore, from October 2022, the amount of CBDC wallets has risen more than twelvefold to 13 million.
CBN Governor assures customers of improved online banking services; says eNaira has emerged as the electronic channel of choice with an upsurge in wallets creation. 6/7
— Central Bank of Nigeria (@cenbank) March 21, 2023
What Brought the Cash Shortage?
For a long time, Nigeria has been significantly cash-dependent, and the Central Bank of Nigeria (CBN) sought to change this by introducing the Central Bank Digital Currency (CBDC). At launch, however, the initial demand for the eNaira was not particularly high.
The current demonetization policies adopted by the Nigerian government have resulted in a significant reduction of the cash in circulation. Specifically, the currency in circulation in Africa’s largest economy has dropped from 3.2 trillion Naira in September 2022 to 1 trillion Naira.
By the end of 2022, a severe lack of cash was experienced and the Central Bank of Nigeria responded accordingly by replacing the old 200-, 500- and 1,000-naira notes with new ones. Despite this, cash remains the primary currency in Nigeria’s informal economy, accounting for approximately 90% of transactions within the country.
eNaira Catching Up in Nigeria
At Tuesday’s press conference, Governor Godwin Emefiele announced that more than 10 billion eNaira has been minted and almost 3.4 billion are in circulation. Additionally, the government has deployed eNaira within the framework of Nigeria’s social scheme to pay impoverished citizens, resulting in the creation of 4 million new wallets.
Furthermore, Emefiele stated that eNaira has already asserted itself as the premier electronic payment channel for financial inclusion and social interventions. Nigerian lawmakers have also expressed enthusiasm for the eNaira’s adoption.