If you have been following recent headline news in Nigeria, you will be aware that cash scarcity is beginning to weigh heavily on Nigerians.
You pay for every transaction with a transfer or an ATM card, but does this work for everything? In the middle of this cash crunch, why is there no mention of the Nigerian CBDC, eNaira?
Let us look at how it all began and why the eNaira isn’t solving the problem. Nigeria’s campaign to accept digital money and transition to a cashless society accelerated on December 6, when the country’s central bank put a limit on cash withdrawals either over the counter or through ATMs.
The new policy impacts almost 200 million individuals, and its consequences are still far-reaching as many Nigerians are feeling the effect while some cities are experiencing unrest as a result.
In a letter to deposit money banks (DMBs), the Central Bank of Nigeria stated that withdrawals for people should not surpass 100,000 per week and 500,000 for enterprises.
ATM withdrawals will be limited to 20,000 per day, and cash machines will only accept 200 notes and smaller amounts.
But with the recent development of the naira redesign, ATMs no longer dispense cash, thus forcing people to long queues in the banking hall which only guarantees you a maximum of 5000 in cash.
The Central Bank of Nigeria (CBN) released the eNaira digital money in October 2021. It is a digital representation of the Nigerian naira, the national currency of the country.
The eNaira is intended to be a safe, efficient, and low-cost payment system that can be used for both domestic and international transactions.
The Central Bank of Nigeria (CBN) anticipates that the eNaira would assist to minimize the costs and hazards associated with cash-based transactions, increase financial inclusion, and improve the efficiency of the Nigerian financial system.
Also read, Will CBN’s Grassroot Campaign drive High rate of Adoption for the eNaira?
The eNaira is based on blockchain technology, which provides a secure and transparent transaction platform. Users can create e-Naira wallets to transfer and receive payments, pay bills, and conduct other transactions.
Individuals, enterprises, and government agencies can use the e-Naira, and it is anticipated to be especially valuable for small businesses and persons who do not have access to regular banking services; however, this is not performing as expected.
Why eNaira is not an alternative
Nigeria is experiencing acute cash scarcity, with protests breaking across the country only days before a crucial presidential election – but many are still refusing to use the government’s digital currency, the eNaira, which promised to enhance retail payments.
The digital naira, which was issued by the Central Bank of Nigeria in October 2021, has had a sluggish start, and adoption has been gradual. Even if Nigerians desired to use the eNaira, their transaction choices with the central bank digital currency (CBDC) remain restricted.
The eNaira, Nigeria’s digital currency, has the potential to provide an alternative to cash, particularly in times of cash scarcity.
However, eNaira is still in its early stages and is not extensively used in Nigeria; many individuals still prefer e-wallets, USSD, and bank apps for transactions.
Also read, eNaira suffers Low Adoption, One Year After launch
Furthermore, the viability of the eNaira as a cash substitute will be determined by a variety of circumstances, including the availability of digital payment infrastructure, internet access, and people’s willingness to use digital payment methods.
Many Nigerians still use cash for daily transactions, and more education and awareness initiatives are needed to increase the usage of digital payment systems.
The unbanked woman in the market and the man who has a tiny kiosk in the area are unaware of eNaira, thus it is not an option for them.
In general, eNaira has the potential to provide an alternative to cash, but it will take time and effort to establish the necessary digital payment infrastructure and promote the adoption of digital payment methods among the public, which I fear will be limited to the educated.
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