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Nigerians’ rejection of CBDC should serve as a warning to other countries

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Despite government incentives, Nigerians are criticizing the African country’s digital currency and seeking resumed access to paper money.

Citizens in Nigeria have come to the streets to protest the country’s cash scarcity, as well as their government’s deployment of a central bank digital currency (CBDC). The scarcity was caused by currency restrictions aimed at transitioning the country to a cashless economy. Yet, instead of embracing the CBDC, Nigerian demonstrators are demanding the return of paper money.
The country’s experience clearly implies that the typical citizen recognizes that CBDCs pose a significant danger to financial independence while offering no particular benefit.

CBDCs have been increasingly popular among central bankers, policymakers, and consulting firms in recent years. Citizens, on the other hand, have had different experiences. When the U.S. Federal Reserve invited opinions on CBDCs, more than two-thirds of the commentators were worried about the threats to financial privacy, financial freedom, and the soundness of the banking system.

Moreover, CBDCs do not provide anything new to the market regarding consumer advantages. Several currencies are available in digital form, to the extent that individuals desire it, via debit cards, payment applications, and even prepaid cards. That much should be evident from Nigeria’s poor acceptance rate, with fewer than 0.5% of Nigerians using CBDC. To put that figure in context, more than half of Nigerians have used cryptocurrencies.


Incentives for CBDC adoption in Nigeria have failed.

The Nigerian government has tried a variety of tactics to increase adoption, but none have been successful. To its credit, the Nigerian government attempted to encourage use with modest steps at first. It lifted access limitations in August 2022, so that bank accounts were no longer necessary to utilize the CBDC. Later, in October, it provided discounts if consumers paid for taxis using the CBDC.
Neither endeavor, however, was productive. Simply said, Nigerians like cash.

Regrettably, the Nigerian government doubled back and implemented even harsher measures, such as currency restrictions. The Central Bank of Nigeria began limiting cash withdrawals to 100,000 naira (US$225) per week for individuals and 500,000 naira ($1,123) per week for enterprises in December.

To make matters worse, the Nigerian government opted this time to redesign the money in a “move aimed at regaining the Central Bank of Nigeria (CBN) authority over currency in circulation” and to “further intensify the push to [a] cashless economy,” according to a CBN news release.

Not only are citizens limited in the amount they may withdraw, but commercial banks also lack the cash to distribute because many are still waiting for the newly designed currency to arrive.
With these limits in place, the Nigerian government was able to drain the economy of cash, paving the way for the CBDC to finally get its due.



A change in conduct cannot be legislated.

Yet, it did not work. Reports about Nigerians battling with currency limitations swiftly circulated on Twitter, TikTok videos, and other social media platforms. Instead of going to the CBDC, Nigerians flocked to the streets to protest the limitations and lack of cash.

The fresh notes are expected to arrive shortly, but Nigerians are unlikely to find comfort even then. “The destination, as far as I am concerned, is to establish a 100% cashless economy in Nigeria,” stated Central Bank Governor Godwin Emefiele.

The company that built the Nigerian CBDC hailed the cash limits a “creative use of marketing” and predicted that other governments would follow suit. Yet, Nigeria should serve as a cautionary story for other nations considering establishing CBDCs.
The central bank “doesn’t want us to be spending cash,” said Ayokunle Olumbunmi, head of financial institutions ratings at Agusto and Co. in Nigeria. “They want us to do transactions online, but you can’t legislate behavior modification.”

Central bankers may favor CBDCs, but money is ultimately a weapon for the people. As long as the hazards exceed the advantages, CBDCs are unlikely to acquire momentum in Africa or elsewhere.