There is an ongoing debate on the adoption of cryptocurrency or digital currencies such as Bitcoin, Ethereum, et al. as a means of exchange in Nigeria; a discussion that has caused a divide in ideologies held by Nigerians who deal in cryptocurrency and the Central Bank of Nigeria (CBN).
Nigeria remains a big player in cryptocurrency transactions globally, with many turning away from the traditional system of banking.
Many wonder what the benefits of cryptocurrency are to the Nigerian economy, wondering why the use of digital currencies isn’t legalised by the country’s apex regulator.
What Is Cryptocurrency?
Cryptocurrency, also known as digital currency, can be described as a means of exchange that is unregulated by Central Banks and is used by groups and individuals.
Cryptocurrency In Nigeria and CBN’s Stance
A study found that cryptocurrency trading in Nigeria was most active than in any other part of the world.
According to a report by Statista, out of 74 countries surveyed, Nigerians were reportedly more likely to have traded in or owned cryptocurrency than any other country.
It cited the financial cost involved in international money transfer between regulated financial institutions steered many towards cryptocurrency.
Over $400 million worth of cryptocurrency transactions are conducted by Nigerians, placing Nigeria in the third spot behind the United States and Russia.
In 2018, the CBN had issued a warning to Nigeria, when the Bitcoin daze swept the globe, stating that it wouldn’t throw its weight behind the digital currency.
The CBN’s caution came on the heels of losses recorded by Nigerians to a flood of Ponzi schemes that saturated the country in that period.
Restating its stance on the use of cryptocurrencies in the country, the Central Bank of Nigeria released a circular that directed all financial institutions to close all accounts dealing in cryptocurrency.
It described the digital means of exchange as “speculative, anonymous, and untraceable”, it also noted that “they are increasingly being used for money laundering, terrorism financing, and other criminal activities.
“Small retail and unsophisticated investors also face high probability of loss due to the high volatility of the investments in recent times.
“In light of these realities and analyses, the CBN has no comfort in cryptocurrencies at this time and will continue to do all within its regulatory powers to educate Nigerians to desist from its use and protect our financial system from activities of fraudsters and speculators.”
Benefits of Cryptocurrency
The middleman is jettisoned. With cryptocurrency, transactions are usually conducted on a peer-to-peer framework.
What this does is create less confusion on what to pay to whom and to whom it should be paid.
There is also the issue of accountability between the parties involved.
Transactions are confidential. There is a dispensation of the background credit checks on your transaction history, usually carried out by financial institutions to verify your capability.
While with cryptocurrencies, the deal is between two parties where you both determine the terms of the deal to be entered into.
The benefits of the adoption of cryptocurrency are shadowed by the apex bank’s regulations, as it remains the final say in the acceptance or rejection of cryptocurrency as a means of exchange.
How Nigeria Can Benefit From Cryptocurrency
According to the President of the Stakeholders in Blockchain Technology Association of Nigeria (SiBAN), Senator Ihenyen, there is an abundance of benefits to the adoption of cryptocurrency in Nigeria.
Ihenyen noted that by focusing on the “negative narrative surrounding cryptocurrency” the Central Bank of Nigeria loses out on major benefits involved in the adoption of cryptocurrency as a means of exchange in the country.
He added that a narrowed view of cryptocurrency leaves Nigeria behind as a global competitor in utilising blockchain.
Ihenyen urged the CBN to regulate crypto exchange in a way that does not “stifle but supports” digital currencies that could lead to the creation of jobs and “attract FDIs”.
“If the CBN doesn’t review its current position [on cryptocurrency], Nigeria will most likely lose out on immense opportunities on becoming a global, digital economy,” Ihenyen said.
Restriction of Capital Inflow Into Nigeria
Following the news of the ban introduced by the CBN, former Vice President Atiku Abubakar stated that the ban would stall the inflow of capital into the country.
Atiku called for a reversal on the ban of crypto trading in Nigeria through licensed banks.
He said in a tweet, “This is definitely the wrong time to introduce policies that will restrict the inflow of capital into Nigeria, and I urge that the policy to prohibit the dealing and transaction of cryptocurrencies be revisited.
“It is possible to regulate the sub-sector and prevent any abuse that may be damaging to national security. That may be a better option, than an outright shutdown.”