According to a report on ZeroHedge, the Central Bank of Nigeria’s (CBN), efforts to move the country towards replacing physical currency with eNaira faced significant resistance, leading to protests nationwide. With a continuous struggle to gain public acceptance and increased scrutiny of the government’s “forceful measures,” the CBDC test run in Nigeria appears to have failed.
The Emergence of CBDCs and the Nigerian Test Case
As the concept of Central Bank Digital Currencies (CBDCs) gains traction, Nigeria’s recent test run with eNaira offers valuable insights and cautionary lessons. According to the report by ZeroHedge, Nigeria’s attempt at adopting the CBDC has been met with significant hurdles, protests, and setbacks. Launched on the Hyperledger Fabric blockchain, Nigeria’s eNaira program aimed to replace physical currency with digital as a step towards a cashless society. However, the transition proved more difficult than anticipated.
Facing Resistance and Tough Measures
Following an October 2021 rollout with government incentives to promote adoption, citizens remained hesitant to embrace the eNaira, with less than 0.5% adopting the digital currency by October 2022. Consequently, the Central Bank of Nigeria (CBN) implemented forceful measures, announcing that original paper notes would only be legal tender until January 31, 2023, according to ZeroHedge. This move effectively forced Nigerians to convert their cash holdings to eNaira despite their general reluctance.
Further restrictions on physical cash followed, with the CBN issuing a letter to all banking institutes in December 2022, implementing a strict ban on cash withdrawals and limits for both individuals and businesses. As Bloomberg reported, 90% of Nigerians previously used cash for transactions, but with these measures in place, they had no choice but to comply with the transition to eNaira.
Unintended Consequences and Public Outcry
ZeroHedge highlighted that while the Nigerian government viewed eNaira’s launch as a step forward, its citizens protested against the shift towards a cashless society. The demonetization of the currency not only reduced the available cash in circulation from 3.2 trillion Nairas to 1 trillion Nairas but also destabilized a society deeply reliant on cash for daily transactions. The government’s forceful approach sparked public outcry, diminishing trust in the new financial system.
Takeaways and Future Implications
Nigeria’s eNaira experiment may offer important takeaways for other countries exploring CBDC options, including the United States Federal Reserve. ZeroHedge emphasized that public perception and trust play a crucial role in the success of CBDC implementation, and governments may need to adopt a more collaborative approach when transitioning to a digital currency system.
Additionally, Nigeria’s test run raises broader questions about the viability, benefits, and drawbacks of the forced adoption of CBDCs. Moving forward, discussions and debates surrounding CBDCs may now not only the technological aspects and potential efficiencies but also the real-life experiences and concerns of the citizens affected by this significant financial shift.