Even with the recent shift in the balance, especially in 2021, that saw a larger number of national institutions accepting crypto the future of finance and some other countries even going a step further to issue their own National Digital currencies (that would be heavily regulated of course), some countries like Nigeria are still bent on keeping her citizens in the dark from an inevitable future.
Meanwhile, under Elon Musk's ownership, Tesla purchased $1.5 billion in bitcoin and went ahead to share the news on Twitter, triggering more speculations and potential investors to buy some for themselves. The payment processor, Master Card, also talks about integrating bitcoin as part of accepted currencies.
Crypto in Nigeria
The crypto market in Nigeria has expanded over the years to the point that it is currently among the top 5 countries with the most crypto users, generating over $200 million in trading volume every month, according to Remitano, one of the biggest and most prominent crypto exchanges in the country.
The introduction of crypto has been instrumental to the lives of young Nigerians who are tech-savvy and looking for a means to escape the woes of unemployment, directly linked to the government's inability to provide enough jobs.
On the 5th of February, as though the government hadn't done enough, the Central Bank of Nigeria gave every bank order to cut ties with every exchange account under their supervision. Anyone who kept on trading should have their assets with the bank Frozen.
Although the CBN claimed in another press release that they were merely enforcing a regulatory order that was dated back to 2017, it is still very intriguing that the talks about it only resurfaced in February 2021; only a few months after the nationwide protest that was staged against police brutality and impunity in the country. The catch here is that the protest relief items and funds used in bailing out detained protesters were all donated by the public members, and guess how? Through BTC.
In the beginning, the donations were paid into an official account agreed on and owned by the Feminist Coalition NPO. But when the government got the banks to freeze their donations, they turned to BTC as the next best option, and so things played out well for a longer period.
The CBN said that they prohibited it because the asset was merely speculative and hammered on the fact that while Central Banks can issue a legal tender, cryptocurrencies are issued by unknown and unregulated entities. They call attention to the illegal activities associated with cryptocurrency, like Laundering, Tax evasion.
However, a good look at the rate of financial crimes will show that there has been a major concern for this one, years before any recorded use of crypto, and to further dismiss this point, the total amount of illegal transactions accounted for less than 1.5% of total transactions that year.
Cryptocurrencies may not be transacted with any linkable ID, but those IDs can be traced to the first transaction.
The Affected citizens, primarily the youths, have since been showing their disapproval and discontent with the CBN'sCBN's directive.
They further state the obvious being that no one controls crypto and, therefore, no one can stop the peer-to-peer exchange of crypto. Such P-2-P exchanges like Remitano are widely accepted in the country. As long as such exchanges still operate in the country, her citizens can keep trading crypto regardless.
The ban may have hurt some direct vendors, but the youths who insisted that trading cryptocurrency is a way out of the country's hardship won't stop trading on P-2-P exchanges.
Another crypto enthusiast and Developer, Chimezie Chuta, said that he believed most people would turn to P-2-P exchanges like Remitano, but it won't be the limit. With Mastercard, Visa, and even PayPal rolling out their crypto features for the year and beyond, it only makes sense that some other users will opt for such alternatives that can link their crypto to existing, legal, financial bodies. Some others, he believed, "will simply use crypto as a choice reserve asset" by holding it for the long-term.
The country's currency has also been notorious for depreciating steadily at snail speed, and cryptocurrency is the easiest way to get your hands on valuable monetary assets or security to use as a hedge, either by buying tokens or stablecoins.
In response to the new ban, users have not only turned to P-2-P exchanges, but they have also resorted to using alternative currencies to deposit and withdraw on direct vendor platforms. Since the main directive is not to trade any crypto on the Nigerian Naira, crypto exchanges that have been affected decided to allow their users to trade with alternative currencies, this option is being exploited by those who have a Dollar domiciliary account.
Those without the domiciliary account can still exploit with stablecoins like USDT, USDC, DAI, etc. If they have a significant amount of stablecoins, they can swap for bitcoin or any other crypto.
What does this mean for investors?
While her citizens are using other crypto exchange methods to continue trading their assets, Affected exchanges like Bundle have rolled out their plans of expanding services to other African nations that also have some interest in crypto. These plans are only rational, as their tendency to further expand from Nigeria to other African countries is being hampered by the CBN.
If they were to keep their African expansion solely in Nigeria, even for the time being, they would be taking a risk, not to mention the loss of potential profit.
The ban could further hinder the free flow of crypto-based investments in the country and Africa due to the significance of Nigerian crypto traders in the African and global markets. Just recently, Jay Z, the popular rapper, and Jack (owner of Twitter), made their crypto expansion plans in Africa public. To this effect, they had already raised $23.6 million in investment funds and were already going on with the plans. All things being as it should, a great investment like this would've found fertile ground in Nigeria, where the economy needs such a boost.
With many prominent banks and wall street investors getting involved with crypto more than they were a few years ago, it is only logical to assume that the crypto space will keep growing in years to come, and it will perhaps get more stable in its market trends. Potential investors will want to expand their horizons in Africa. Still, with the biggest players on the continent being prohibited from participating, one can only keep fingers crossed on what to expect.
This ban doesn't affect the crypto-based investments alone, but it can potentially pursue other existing ones. Those who may have been trying to find some certainty in the unstable policies governing the country's financial space may be further discouraged and take flight resulting in more Capital outflow than influx. This still ends up hurting the already battered economy.
Bitcoin was invented to tackle the usual delays and excessive charges that come along with cross-border transactions/ wire transfers. The ban will do very little in preventing such transactions from continuing, but at the same time, the ban is also going to give rise to more undercover and "illegal" transfers of money.
Since crypto can't be touched, it simply means that anyone trading crypto is acting illegally, ignoring the directive of the CBN, even if they don't necessarily buy weapons, drugs, or launder money. No government is still capable of totally enforcing the prohibition of crypto trading. They will only end up painting the legal activities to be illegal.
Furthermore, the crypto storm has done nothing but left many jobs and money-making opportunities for young Nigerians who know how to take good advantage of the technology.
The ban may cause some people to lose their crypto gained jobs, especially when working with direct vendors such as Binance, Coinbase, etc. The current unemployment rate is almost at 30%, and this will only see it rise further.
Conclusion
From what we have seen so far, Nigeria's crypto market may have slowed down a bit, but it will continue to thrive. Considering this, the CBN must find a way to harness the crypto prowess for their good and country.
A good way to start will be to create government-issued digital assets pegged to the Nigerian Naira. The currency already has multiple exchange rates, with Banks trading lower than the Forex market and the Black market gaining more customers who want maximum value for their money. Although this will do nothing to stabilize the currency's value, it is a good place to start.
This initiative will also make the currency more accessible on trading platforms to traders that would like to trade on this market. This step has already been taken by China, one of the first countries to ban crypto.
With the country rolling deep (and deeper) in debt, with little hope of regaining balance, a means of attracting foreign and local investors with capital should be on the top of their to-do list. Banning the use of crypto is certainly not attractive.
