Is the cashless future nearer than we expect it to be? Here is an example from Nigeria and eNaira?
Central Bank Digital Currency (CBDC) is a digital form of a country's currency issued and backed by the central bank. Its convenience, speed, and security are becoming increasingly popular worldwide. However, many still have reservations about it, particularly regarding their privacy and freedom to control their finances. Now we have a real-life example where we can first see how governments could make all of to switch CBDCs
Governments worldwide are currently grappling with the issue of how to encourage the adoption of CBDC while balancing citizens' concerns. One country that has already implemented its own CBDC is Nigeria. The Central Bank of Nigeria launched its digital currency, the eNaira, in October 2021, making it the first African country to do so.
But how did the Nigerian government get its citizens to use the eNaira?
n October 2021, the Nigerian government launched its digital currency, the eNaira. However, only 0.5% of Nigerians were using the currency one year later. Given the concerns about privacy and government control over financial transactions, the government's low adoption rate was unsurprising. Many people are not ready to give the government that much power.
To encourage the use of eNaira, the government took drastic measures.
They started by limiting the amount of cash people could withdraw from ATMs and banks to just $44 per week. This was a significant hardship for many Nigerians, who needed about $40 daily to survive. However, the government went even further and banned cash altogether.
Then, in October 2022, the Nigerian government announced that they were no longer accepting old banknotes and that new banknotes would be given to the people. However, the banks failed to issue the new banknotes, leaving many people without access to physical cash.
As a result, there was a 60% increase in eNaira usage.
This real-life example from Nigeria highlights the challenges of transitioning from traditional to digital currency. The government's heavy-handed approach to promoting eNaira adoption has caused hardship for many Nigerians who rely on cash for their daily transactions, particularly those who are unbanked or underbanked. (watch the video over here )
While the government's efforts to promote eNaira adoption may have increased usage, the lack of access to physical cash has also created unintended consequences. Governments and central banks need to consider citizens' concerns and ensure that the adoption of digital currency is a voluntary choice rather than a forced one.
What is your thought on CBDCs? Do you think we are closer to the CBDCs than we think we are, especially when banks are falling like dominos?