Central Bank Digital Currency (CBDC) Adoption Challenges and Remittance Impacts: Empirical Evidence from Nigeria’s eNaira Compared with Global Retail Pilots and US Federal Reserve Policy Stance

Abstract

This paper evaluates adoption challenges and remittance potential of central bank digital currencies (CBDCs) by contrasting eNaira in Nigeria, cross-border retail pilots and also, US Federal Reserve Bank's view on CBDCs. The paper reviews the literature heralding the efficiency of the design, financial inclusion and payment system revolution but the results reveal a gap between the expected and realisation of adoption. The paper extends the current literature approaches by drawing on related studies to synthesise studies on CBDC design, adoption and institutional aspects. The findings indicate that user adoption is the bottleneck: although having access to the CBDC system infrastructure, financial users will not have an incentive to continue using CBDC for transactions without the right adoption conditions, such as user benefits, trust and network impacts. Remittance related impacts, in which impact is often the sought-after feature, depend on interoperability and coordination, which are yet immature. The effect on financial systems (such as disintermediation) is not extensively leveraged in absence of intensive adoption; implying that the impact on financial systems is dependent on critical mass adoption. Case studies across countries highlight these differences in policy, as operational constraints in value addition approach (via implementation) and a lag in exposure to and impact of defensive approach. The findings conclude that the effectiveness of CBDC is dependent on integration of design architecture, behavioural and institutional design concerns.