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National cash shortage forces Nigerians to use the eNaira for payments

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(Kitco News) - The struggles that Nigeria’s central bank digital currency (CBDC) – the eNaira – has faced in terms of adoption have been well documented, but it appears as though a sea change is in order as a severe shortage of national fiat reserves has led to a boost in the adoption of the CBDC.

According to a Tuesday report from Bloomberg, Nigeria’s chaotic demonetization policy has led to a shortage of banknotes, which has forced Nigerians to turn to alternative payment methods, including the eNaira.

The lack of available cash, in a country where physical notes previously accounted for 90% of all transactions, has led to a 63% increase in the value of eNaira transactions this year, with more than 22 billion naira ($47.7 million) processed so far. Thirteen million e-wallets have also been created, a more than twelve-fold increase from October, according to Godwin Emefiele, governor of the Central Bank of Nigeria (CBN).

Emefiele indicated that the amount of currency circulating in Nigeria has dropped to 1 trillion naira from 3.2 trillion naira in September.

The cash shortage began in late 2022 after the central bank initiated a plan to replace old 200-, 500- and 1,000-naira notes with new ones in an effort to withdraw excess liquidity from the system, get a handle on inflation and curb rising insecurity.

The central bank is attempting to have “an optimal level of cash” in circulation that keeps the economy functioning but discourages people from bypassing the banking system, Emefiele said.

He added that roughly 3.4 billion out of the 10 billion eNaira minted so far are currently in circulation and its uptake has been aided by the government's move to begin paying poor Nigerians who qualify for aid under a welfare program using the eNaira. This has also led to the creation of four million new e-wallets.

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

The increase in adoption comes nearly 18 months after the eNaira was first launched and at a time of economic strife in the country amid a shortage of cash. In January, amid a collapse in the value of the naira, the government placed limitations on the amount of cash citizens could withdraw from ATMs, which led to a spike in the price of Bitcoin against the naira.

Nigeria looks to take control of CBDC technology as eNaira rollout stalls

On Tuesday, the ability for Nigerians to purchase crypto directly from their digital wallets got easier when the popular crypto wallet MetaMask announced a new partnership with payment provider MoonPay that will allow Nigerians to purchase crypto via bank transfers.

The new feature, which is available within the MetaMask mobile and Portfolio DApp, significantly simplifies the process of buying crypto without using credit or debit cards in Nigeria.

“This is an essential next step in a critical market that has embraced crypto and web3 but faces serious challenges when using fiat to crypto on-ramp,” said Lorenzo Santos, Senior Product Manager at MetaMask. “We are reducing friction and bringing down barriers to keep supporting Nigerians as they onboard into web3.”

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