Nigeria is a country known to many as a top economic destination in Africa and with good reason. The country has a Gross Domestic Product (GDP) of $432 billion, (the highest in Africa), and the largest economy in Africa according to the World Bank. The economic productivity of the country made it easy for different innovations to take off. In 2009 the cryptocurrency “Bitcoin”, the first and advent cryptocurrency was introduced to Nigeria as stated by Abdullateef Abdul.
Fast forward 10 years and cryptocurrencies are the talk of the town. Numerous businesses accept bitcoin, Ethereum, and other cryptocurrencies as means of payment, people have become millionaires of crypto trading and business is booming for cryptocurrency companies especially bitcoin.
The rise of Cryptocurrency.
With their love of “quick-get–rich” opportunities, Nigerians welcomed cryptocurrencies with open hands. According to a report by Citigroup(An investment banking company), Nigerians were the third largest holders of bitcoin as a percentage of Gross Domestic Product according to the The Africa report.
Another factor that aided the promotion of cryptocurrencies in Nigeria includes helping cross-border transactions according to the The Africa report. Companies like Kobocoin and SureRemit now offer to make payments with their currencies saving on the high rates from banks and other money transfer services.
These few digital transitions have not only made life easier for Nigerians but have slowly become a way to bypass the Nigerian Naira (₦). The fluctuation of the Nigerian Naira(₦) came with a lot of problems for many Nigerians, the currency is currently half the value it was in 2016 as stated by The Africa report.
The uncertainty that came with the Naira was a lot to handle for numerous Nigerians hence the enthusiasm when cryptocurrencies were introduced. Although cryptocurrencies do fluctuate the market is more generalized because everyone in every country is affected by the rise and fall of any cryptocurrency. For this reason, so many Nigerians find comfort in it.
From its general accessibility to its quick adaptability cryptocurrency became the way forward for many Nigerians although to the demise of the Nigerian government and the Central Bank of Nigeria(CBN) according to Mondaq.
The Banning of Cryptocurrency.
In February 2021 the governing bank in Nigeria(CBN) sent a press release to banks and other financial institutions in Nigeria stating that trading with cryptocurrency and enabling payment for cryptocurrencies are banned as stated by Mondaq.
One of the main reasons being the high use of cryptocurrency in criminal activities. Cryptocurrencies are intentionally made from blockchain technology that centers on decentralization. Unfortunately for law enforcement agencies this design prevents cryptocurrencies from being controlled by a central authority as stated by Mondaq.
The inability to regulate the use of cryptocurrency makes it open to illicit usage like money laundering and crimes funding according to Mondaq. This coupled with other animosities such as the absence of a Know your customer standard(KYC) have added to the skeptism of cryptocurrencies by the Nigerian government.
Despite banks and financial institutions being banned from the use of cryptocurrency in Nigeria, it is not illegal but unregulated. Numerous Nigerians still trade with cryptocurrency but they practice majorly peer-to-peer trading according to OLISA AGBAKOBA LEGAL.
This has seen Nigeria climb in the charts of cryptocurrency usage. According to OLISA AGBAKOBA LEGAL Over 6.3% of Nigeria’s population own at least one type of cryptocurrency. Nigeria is also ranked 6th out of the top 20 countries in terms of crypto adoption, a list with multiple heavyweight countries.
What initially began as a quick-get-rich scheme in Nigeria has quickly developed into a money making empire. Both the unreliability of the Naira and the high transaction charges from banks and other financial institutions have not only promoted the use of cryptocurrency in the country but has shown that the bitcoin is here to stay.
What is the way forward?
The governments ban of cryptocurrency in banks and other financial institutions majorly came as a form of controlling the volatility of the financial market and the funding of criminal activities all over the country. With the reluctance of Nigerians to drop cryptotrading and the use of cryptocurrencies, the government in collaboration with the Central Bank of Nigeria need to establish establish practical research and development plans.
This would help benefit the government in the investigation of the illegal use of cryptocurrency. This could be implemented by:
- Punishing unregulated cryptocurrency money transfer companies that indulge in money laundering. The Nigerian authorities can set aside laws that would make sure certain money transfer companies that help the transfer of cryptocurrency illegally are duely punished. This would reduce the impact of crimes on the cryptomarket.
- The federal government of Nigeria could also form cross jurisdictional collaborations among agencies worldwide. Mondaq.
Though the problems have long lasting effects on the financial institution and crime rate in Nigeria, if these solutions are implemented with care and efficiency, they could help reduce the crime deficit in cryptotrading and enable a safe cryptocurrency market for Nigerians.