Cryptocurrency Adoption, Financial Stability Risks, and Central Bank Digital Currency Design for Nigeria: An Original Policy Framework

Cryptocurrency adoption in Nigeria accelerated dramatically between 2020 and 2023, ranking Nigeria among the highest cryptocurrency adoption countries in Africa, and the resulting financial stability implications, coupled with the Central Bank of Nigeria's eNaira central bank digital currency launch, require original theoretical and empirical treatment at the doctoral level. This study develops an original policy framework for managing cryptocurrency-related financial stability risks and optimising central bank digital currency design in Nigeria, integrating monetary economics theory, digital currency design literature, and macroprudential stability analysis. The theoretical framework formally models the conditions under which private cryptocurrency adoption generates monetary policy disruption, banking disintermediation risk, and cross-border capital flow volatility in a developing economy context. An original regulatory taxonomy for cryptocurrency activities in Nigeria is proposed, based on function-based risk categorisation. Empirically, the adoption dynamics of cryptocurrencies in Nigeria were analysed using monthly data from 2017 to 2023 from Chainalysis on-chain data, the Central Bank of Nigeria eNaira adoption statistics, and a primary survey of 500 cryptocurrency users in Lagos, Abuja, and Onitsha. Structural equation modelling and logistic regression were employed to identify adoption drivers and financial stability risk channels. Results confirm that cryptocurrency adoption is primarily driven by inflation hedging motivation and dissatisfaction with naira exchange rate instability, rather than transaction efficiency. eNaira adoption remained low (2.3% of survey respondents used it actively), constrained by trust deficits and limited merchant acceptance. An original incentive-compatible eNaira design framework is proposed to accelerate adoption. The study makes original contributions to central bank digital currency design theory calibrated for African emerging market contexts.

Keywords: cryptocurrency adoption, central bank digital currency, eNaira, financial stability, Nigeria