CBDCs Failing in Nigeria

Despite an estimated 35% of the adult Nigerian population owning Bitcoin or cryptocurrencies, the adoption of the local CBDC has been a massive failure with Bloomberg reporting only 1 in 200 Nigerians using the “eNaira” (0.5% of the population). In April, one of the leading crypto exchanges Kucoin reported that roughly 34 million Nigerians aged 18-60 own a digital currency. So it wouldn’t be possible to argue that residents are simply uninterested in digital currencies full stop. Similarly, their use for bank cards and internet banking are at high levels.  

Prior to the eNaira, the only currency in the economy which was a liability of the Central Bank were paper notes and fiat coins issued and circulated. Naira created and monitored by banks were and still are the liability of the banks issuing and holding them.

As the first African nation to introduce a central bank digital currency, the eNaira is now a full year into the launch. The Bahamas, Saint Lucia, Grenada, Antigua and Barbuda are among the seven countries that have launched central bank digital currencies.

The government is turning to taxis to try to drive demand, with passengers entitled to a 5% discount if they use eNaira to pay for their motorized rickshaw.

On the other side of the ledger, the Nigerian Government is now limiting ATM withdrawals and trying to incentivise greater CBDC use. Weekly cash withdrawals are capped at approximately US$225 for individuals and US$1,125 for companies. Daily withdrawals are capped at US$45 a day. Any withdrawal above that will incur a 5% or 10% fee respectively. Citizens around the world are facing and pushing back against digital fiat.

Anecdotally from a voice on the ground, 30 year old Nigerian James Ndubuisi questioned the need for an eNaira. “It needs to be entirely binned”, he told Al Jazeera. After downloading the app on the day of release, Ndubuisi found the features neither valuable nor reasonable.

In Australia, the RBA has been continuing to talk up an eAUD to be trialled early next year. The Central Bank admits that actual adoption of an eAUD would replace cash and would come with a large number of costs and dangers that are yet to be addressed. There appears to be some temperance from within the RBA as Assistant Governor Brad Jones has indicated that the bank is sceptical on the usefulness of a CBDC in a society that already has a highly developed payments system. One wonders what legitimate need for a CBDC there could be beyond the potential for increased state surveillance of citizens’ transactions.

Scepticism from the public is also very significant as more than 77,000 Australians have now signed Petition EN4638 - Disadvantages of Central Bank Digital Currencies at time of writing.

If there is no option for physical cash this gives central banks the ability to implement negative interest rates. Programmability: CBDCs give central banks a unique opportunity to make money “programmable”. For example: Expiration, with a direct relationship with your central bank, CBDCs could permit a currency expiration policy.

The authors of the petition are requesting: “We therefore ask the House to enshrine the use of cash in law”.

There is of course one enduring and true form of money without such counterparty risk… gold and silver.