Three years after the launch of the digital naira in Nigeria (eNaira), the central bank digital currency only accounts for about 0.36% of the total national currency in circulation. Given this abject failure, what lessons can other countries draw? What should they focus on?
1. A CBDC must offer clear benefits over existing forms of money and payment systems. The lack of such advantages in eNaira has resulted in low adoption rates.
2. It’s important to ensure that the CBDC is seamlessly integrated with the current financial habits of households and the existing infrastructure.
3. It’s necessary to create a simple and intuitive system for using a CBDC, accessible to the population at large.
4. Large-scale awareness campaigns should be held to explain the benefits and uses of CBDC.
5. Instead of a full-scale launch, it might be more effective to start off with pilot projects, gather feedback, and then gradually scale up the system.
6. Partnerships with technology companies and financial institutions can help improve the functionality and adoption of CBDCs.
7. CBDCs should offer comparable or superior benefits to popular cryptocurrencies.
A CBDC could fail for the following reasons:
1. Lack of real benefits for users.
2. Difficulty of use or limited accessibility.
3. Insufficient integration with existing financial systems.
4. Security or privacy issues.
5. Lack of public trust in government digital initiatives.
6. Competition from more attractive alternatives (cryptocurrencies, mobile payments).
7. Insufficient support from businesses and financial institutions.
8. Technical issues or system failures.
To avoid failure, countries should carefully study the needs of their households, create a reliable and user-friendly infrastructure, provide clear benefits of using CBDCs, and implement the system gradually, taking into account user feedback. It’s also important to create a supportive regulatory environment that encourages innovation and protects users.