Digital Currency Grows Significantly, Yet Traditional Notes and Coins Decrease
The Central Bank of Nigeria (CBN) has reported a substantial surge of 284.6% in the volume of eNaira in circulation, reaching N9.78 billion in August. However, in contrast, the volume of traditional notes and coins witnessed a decline of 14%, totaling N2.65 trillion in the same period, as indicated in the CBN's recently published 'Economic Report' for August 2023.
Despite the remarkable growth in eNaira adoption, the CBN emphasized that the digital currency's volume remains relatively insignificant compared to traditional coins and notes, constituting only 0.37% of the Currency-in-Circulation (CIC), with notes and coins accounting for 99.63%.
The report noted a decline of 11.7% in the overall Currency-in-Circulation, settling at N2.66 trillion in August. The CBN attributed this reduction to the increasing adoption of alternative payment channels, including electronic transfers and other digital platforms.
The CBN's efforts to promote the eNaira, launched in 2021, have faced challenges in achieving widespread adoption. The International Monetary Fund (IMF) revealed in a report titled 'Nigeria’s eNaira, One Year After' that approximately 98.5% of eNaira wallets remained unused one year after its launch.
The report highlighted a slow and low adoption rate among households and merchants, with retail wallet downloads experiencing an initial surge before tapering off. As of end-November 2021, the total number of retail eNaira wallets reached around 860,000, constituting only 0.8% of Nigeria's active bank accounts. The IMF also noted that merchant wallet downloads were about one eleventh of the number of merchants with Point-of-Sales (POS) terminals, which enable card payments.
The CBN's ongoing efforts to promote digital currency adoption will likely be influenced by the continuous evolution of consumer preferences and technological advancements in the financial sector.
