A Central bank Digital currency (CBDC) is an electronic form of central bank money that citizens can use to make digital payments and store value. It is a virtual form of the country’s fiat currency. As Michael Bordo, professor of economics at Rutgers University has said, monetary transformations through history have been driven by changing technology, changing tastes, economic growth, and demands to effectively satisfy the functions of money. According to prof. Bordo a CBDC would satisfy the three basic functions of money, a unit of account. a medium of exchange, and a store of value.
Apparently technological change in money and finance is inevitable, as global business changes in dimension and dynamics. Many countries are consequently moving toward adopting an electronic version of their local currency. Among other things, it is generally believed that the adoption of an e-money format will enable countries to track the flow of money and also bring the unbanked population into the mainstream economy.
Nigeria launched its eNaira Central Bank Digital Currency on October 25, 2021, to become the first country in Africa, and one of the first in the world to introduce a central bank digital currency. With over 2 billion digital payment transactions valued at over ₦160 trillion in the year 2020, Nigeria has a huge potential for digital money. However, the eNaira may not improve the value of the Naira if the fundamentals for a productive economy such as infrastructure, competitive industries, internet, task-specific digital knowledge, and overall human capital are not in place.
