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CBDC | The Fear of Commercial Banks that a CBDC Could Lead to Disintermediation is Real, Says Central Bank of Nigeria

In a new book titled ‘Economics of Digital Currencies’ by the Research Department of the Central Bank of Nigeria, the bank agrees that banking sector intermediation is a key risk potentiated for the eNaira.


“The fear of commercial banks that a CBDC could lead to disintermediation is real. The CBN understands this fear and in addition to the use of a tiered wallet structure with wallet balances and transaction limits, it is taking further steps to address this fear in a collaborative way.” – Central Bank of Nigeria

In Chapter 6 of the book, the bank says that the risks of disintermediation may arise as liquidity conditions of banks are impacted when households demand for the eNaira in exchange for bank deposits.

This is because the funds converted by customers from their existing bank deposits into eNaira would not be available for banks to utilize for lending activities as the wallets are domiciled with the CBN. This risk of disintermediation was found to be greater if the Central Bank makes the eNaira interest-bearing, one of the recommendations from experts:

“If individuals shift most bank deposits to CBDCs, banks may feel pressured to hike deposit rates or obtain more costly or volatile wholesale borrowing. This may, in turn, lower a bank’s profitability and limit their capacity to lend to the real economy. In Nigeria, this risk has been largely mitigated by ensuring that the movement of deposits from the banks to the eNaira wallet does not exceed a certain cap.”


At the moment however, the current volume and adoption rate of the eNaira, has, so far, not exerted a significant impact on transferable deposits of banks.

Despite risks such as cybersecurity, financial sector disintermediation, and operational challenges, the bank the supports CBDC because the risks outweigh the benefits:

Fostering rapid financial inclusion
Reducing the cost of processing cash
Enabling direct welfare disbursements to citizens
Reducing the size of the informal economy and increasing tax collection
Boosting cross-border trade and remittancess
Reducing the cost and improving the efficiency of payments
Engendering economic growth
Aids in establishing credit history
Access to peer – to – peer (P2P) loans


Account – based CBDC is seen as an opportunity to maintain control of monetary policy as token – based private currencies grain ground among the populace.

“The absence of a swift and effective solution to preference for cashless payments as well as misplaced fears that central banks’ actions sometimes lead to hyperinflation, created the space for nongovernment entities to establish new forms of “private currencies” that seemed to have gained popularity and acceptance across the world, including in Nigeria.”


In Chapter 4 of the book, the CBN notes that its research suggests that the prices of Bitcoin influence the real exchange rate, and consequently, the price level with serious implication for monetary policy.

The following successes have been achieved following the launch of the eNaira as of October 2022:

Full integration of 33 banks onto the eNaira platform
The bank has successfully minted N3.00 billion ($3.98 million)
Issuance of about N2.10 billion ($2.75 million) in eNaira to financial institutions
About 1 million (919,00) customers have been on – boarded
Successful registeration of over 3,305 merchants on the eNaira platform across the country
Over 700,00 transactions across the country amounting to about N8.00 billion ($10.47 million) have been recorded on the platform

Since its launch, the total amount of eNaira minted by the CBN is ₦2.00 billion Naira as of December 2021. However, out of this total, only ₦0.94 billion was in circulation as of December 2021. This increased by 6.4 per cent to ₦1.00 billion in March 2022, then made a significant climb to ₦1.36 billion in June 2022 and remained the same in July 2022.

The rather lethargic growth can be attributed to the slow acceptance and adoption of the eNaira by individual users which is evident in the low number of active consumer wallets (wallets carrying out transactions) which stands at 10,420 compared to 187,190 wallets activated for use as of July 2022.

This is an improvement from the 6,800 and 171,550 active and activated wallets in May 2022 and 5,090 and 161,120 active and activated wallets in March 2022.

As the CBN takes proactive measures to establish consumer confidence in digital currency, a gradual substitution of cash for digital currency is imminent in the near future, the bank insists. The CBN’s projections show that both the number of wallets and volume of transactions are expected to increase significantly over the next 5 years.

The Central Bank of Nigeria (CBN) expects over 20 million eNaira wallets downloads and a projected 300 million in volume of transactions, respectively, by 2026.


The book is available here.




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