Nigeria's CBDC Failure: Lessons for Kenya and Other Developing Countries (2024)

Nigeria's attempt to implement a central bank digital currency (CBDC) failed to gain widespread adoption, with less than 0.5% of the population using it. This failure offers valuable lessons for Kenya and other developing countries considering CBDC adoption.

One key lesson is the importance of public acceptance.

Nigeria's government imposed cash withdrawal limits and currency redesigns to promote CBDC adoption, but these measures backfired, leading to public protests and dissatisfaction. This suggests that CBDCs should be introduced with an inclusive approach, understanding the community's needs and habits.

Another key lesson is the importance of education and digital literacy.

Before rolling out CBDCs, governments must educate the public about their benefits, risks, and workings. This can be done through public consultations, pilot tests, and educational campaigns.

Additionally, developing countries need to ensure that they have the necessary infrastructure to support CBDC adoption.

This includes widespread and stable internet access, as well as digital devices such as smartphones. Governments must also invest in cybersecurity measures to protect user transactions and data.

Finally, CBDCs must offer tangible benefits to the public over existing payment solutions.

This could include lower transaction costs, faster transaction times, and greater accessibility for the unbanked.

Here are some specific steps that Kenya and other developing countries can take to increase the chances of success for their CBDC initiatives:

• Conduct extensive public consultations to understand the needs and concerns of the community.This will help to ensure that the CBDC is designed to meet the needs of the people and is likely to be adopted.
• Invest in education and digital literacy programs to ensure that the public understands how to use CBDCs safely and effectively.This could include partnering with schools, community organizations, and the private sector to develop and deliver educational materials.
• Develop a CBDC that is interoperable with existing payment systems.This will make it easier for people to use CBDCs and encourage adoption.
• Work with banks and fintech companies to promote and distribute CBDCs.This could involve partnering with these institutions to integrate CBDCs into their existing payment platforms.
• Offer incentives for people to use CBDCs.This could include discounts on goods and services or cashback rewards.

By following these steps, Kenya and other developing countries can increase the chances of success for their CBDC initiatives and reap the benefits of this new technology.