An estimated 85 central banks are currently seeking to create digital currencies, but adoption has been slow.
This is the case in Nigeria, which alongside Jamaica, the Bahamas, and the Eastern Caribbean, is among the jurisdictions that have so far launched the Central Bank Digital Currencies (CBDC).
According to Nicholas Anthony, the adoption rate of CBDC in Nigeria has been dismal. Here is his review, which was published by the Cato Institute on December 19, 2022.
Faced with dismal adoption rates of its central bank digital currency (CBDC), the Central Bank of Nigeria has restricted cash withdrawals to push citizens into using its CBDC. Unfortunately, restrictions on (and the eventual elimination of) cash are just one of the risks that Norbert Michel and I warned about in a paper we published in November.
Nigeria launched its CBDC (the eNaira) in the fall of 2021, but few Nigerians have been eager to use it. Current estimates suggest less than 0.5 percent of Nigerians are using the CBDC. To put that number into perspective, more than 50 percent of Nigerians use cryptocurrency.
When it comes to increasing the popularity of a product, the private sector usually only has so many options. For instance, the product itself could be improved or the price could be discounted. To their credit, the Central Bank of Nigeria tried both options. In August, the CBDC programme was changed so that Nigerians no longer had to have bank accounts to use the CBDC—a bid to attract the 55 percent of adults that are unbanked. And then in October, the central bank offered a 5 percent discount for taxi payments in an effort to “discount the price” of using the CBDC.
Yet governments have a few privileges that ordinary businesses do not. Namely, they can “increase adoption” by establishing legal barriers to hinder alternatives or outright prohibit those alternatives. The Central Bank of Nigeria already took steps to prohibit cryptocurrencies, but now it seems even cash isn’t safe as cash withdrawals are now limited to ₦100,000 ($225) per week for individuals and ₦500,000 ($1,123) for businesses.
Nigerians can likely expect those restrictions to increase over time. In a statement, central bank Governor Godwin Emefiele said, “The destination, as far as I am concerned, is to achieve a 100% cashless economy in Nigeria.”
Interestingly, some have tried to defend the move. Simon Chantry of Bitt—the company that was contracted to develop Nigeria’s CBDC—responded that he “wouldn’t be surprised if we see central banks try different, creative options to stimulate [CBDC] adoption.” Restrictions on freedoms have been characterized in many ways, but describing them as “different” and “creative” is a concerning strategy.
As it stands, there appears to be no unique benefit that a CBDC may offer that the private sector is not already providing or developing. Norbert Michel and I have documented this reality extensively, but it should also be evident by the fact that just 0.5 percent of Nigerians are using the CBDC. More so, it should be evident by the fact that the Nigerian government has resorted to restricting alternatives.
As governments continue to weigh the costs and benefits of CBDCs, they should be mindful that if a product or service has to be forced on citizens, it’s probably not a product or service that should be offered at all.
