The Central Bank of Nigeria has published a press release refuting news reports that claim the eNaira CBDC would pose a threat to Nigeria’s financial stability.
PRESS RELEASE: eNaira No Threat To Financial Stability pic.twitter.com/MYwxUoHvWe
— Central Bank of Nigeria (@cenbank) October 9, 2023
In September 2023, the bank released a 300-page book that delved into the financial consequences of implementing a Central Bank Digital Currency (CBDC). The book addressed a wide range of subjects, including the potential impact of a CBDC on:
- Deposit liabilities
- Regulatory issues
- Social welfare considerations, and
- Public sentiment
Based on the book content, some uncited news reports, in both traditional and social media platforms, claimed that the adoption of an eNaira would significantly undermine Nigeria’s financial stability. The bank suggested that the authors of these stories drew inspiration from misunderstandings and misinterpretations of issues related to the use of cryptocurrencies, a subject extensively discussed in the book.
Among the controversial areas touched in the book is the possibility for CBDC accounts to substitute traditional bank deposits undermining the importance of commercial banks.
This development could result in increased centralization which would have substantial ramifications for financial stability. Therefore, numerous central banks are considering implementing CBDC holding limits as a precautionary measure.
In 2022, former Central Bank of Nigeria Governor, Godwin Emefiele, reportedly chastised banks for ‘apathy’ in promoting the CBDC to the over 200 million Nigerians.
The resolution of these issues also hinges on the widespread adoption of the eNaira. According to the International Monetary Fund (IMF), so far the progress has been relatively low, with the institution recommending the bank to consider utilizing government aid programs, merchant payment systems, and more favorable foreign exchange (FX) rates for remittances to incentivize broader adoption of the eNaira.
The IMF indicated that one possible reason for the sluggish adoption of the eNaira could be Nigeria’s phased approach to the CBDC implementation. Initially, access to the eNaira was limited to bank account holders which may have hindered broader adoption and usage among the general population.
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