The number of Nigeria’s central bank digital currency (CBDC) wallets reached 13 million in March, marking a twelvefold increase since the launch of the eNaira last October. Following tepid adoption, CBDC transaction value in Nigeria soared by 63% since October 2021, spurred by the central bank’s decision to replace old bank notes, resulting in an acute cash shortage.

CBDC Transaction Value up 63% Since its Launch

The number of CBDC users in Nigeria jumped by more than 12 times to 13 million since the introduction of eNaira in October 2021, according to Godwin Emefiele, governor of the Central Bank of Nigeria. The value of CBDC transactions also rose by 63% to 22 billion nairas ($47.7 million) during that period.

The surge comes amid Nigeria’s demonetization policy that has forced residents to look for alternative payment channels. The decision by the central bank to replace old bank notes with larger denominations during elevated inflation levels caused a severe cash shortage in the country. The amount of its fiat currency in circulation plummeted to around a trillion naira from 3.2 trillion in September, representing a decline of nearly 70%.

The cash scarcity crisis emerged in late 2022 after the central bank of Nigeria started replacing old 200-, 500- and 1,000-fiat notes with new ones to reduce excess liquidity and bring down inflation. Since then, over 10 billion eNaira have been minted, said Emefiele.

The CBDC Use in Social Scheme Payments Contributes to eNaira Adoption

Nigeria and other developing nations were among the first economies to recognize the significance of a CBDC in improving fiat capabilities. However, eNaira adoption among Nigerians has been sluggish so far as cash accounts for roughly 90% of informal economy transactions. But the cash deficit caused by Nigeria’s demonetization policy did not leave residents with many choices, leading to a sharp spike in eNaira transactions.

The African country also boosted eNaira adoption by using the CBDC to transfer social assistance payments. Emefiele said the social scheme added around 4 million new eNaira wallets.

“The eNaira has emerged as the electronic payment channel of choice for financial inclusion and executing social interventions.”

– Godwin Emefiele, governor of the Central Bank of Nigeria said.

The West African nation was among the first countries to join the CBDC race, along with China and the Bahamas. More recently, several nations have entered the CBDC club, including India, Brazil, Japan, and Russia.

This article originally appeared on The Tokenist

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