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What CBN’s Ban On Cryptocurrency Means For The Struggling Nigerian Economy

Tunbosun Oyinloye

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CBN Officially Puts a Stop to Cryptocurrency Trading in Nigeria

In a new directive, the Central Bank of Nigeria (CBN) has instructed Deposit Money Banks (DMB) and other financial institutions to close accounts used in trading cryptocurrency.

This was contained in a press statement signed by Bello HassanDirector of Banking Supervision, and Musa JimohDirector of Payments System Management Department.

It’s expected to take effect immediately.

According to the apex bank, the new directive follows an initial caution to enlighten the general public about the risk associated with cryptocurrency.

However, in the latest development, CBN is completely cutting off the chances of participating in any form of cryptocurrency trading.

“Further to earlier regulatory directives on the subject, the Bank hereby wishes to remind regulated institutions that dealing in crypto currencies or facilitating payment for cryptocurrency exchanges is prohibited.”

“Accordingly, all DMBs, NBFIs, and OFIs, are directed to identify persons and/or entities transacting in or operating cryptocurrency exchanges within their systems and ensure that such accounts are closed immediately,” the press release read in part.

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Although the latest move by the CBN isn’t unexpected, it is coming in a time when cryptocurrency adoption in the country is at its peak.

Implications of the new directive on the booming cryptocurrency market in Nigeria

Cryptocurrency is rapidly taking on the global financial market like a plague, and governments of various countries are sampling different regulatory approaches.

In Nigeria, for instance, the adoption rate of cryptocurrency has become quite alarming, with more than half a billion dollars traded so far.

This claim is also evident in a recent report shared by Paxful, a global leading peer-to-peer bitcoin market place.

The P2P cryptocurrency trading platform reported that Nigeria is currently the second-largest bitcoin market in the world, next to the United States of America.

Furthermore, the report disclosed that Nigeria had traded over 60, 215 bitcoins (BTC), valued at $566 million in the last five years.

CBN Officially Puts a Stop to Cryptocurrency Trading in Nigeria | Techuncode.com

Source: CFO

Similarly, Arcade Research ranked Nigeria fifth globally, with about 11% of its internet subscribers owning or using cryptocurrency.

While the figure clearly indicates that cryptocurrency trading is actively taking place in Nigeria, an unregulated environment contributes greatly to these quotas.

Until now, there hasn’t been any major regulation from the Nigeria government that restrict or perhaps oversee cryptocurrency trading in the country.

However, this vulnerability has fueled the interest of many Nigerians, especially youths in the cryptocurrency trading business.

As of now, there are tons of Non-Bank Financial Institutions (NBFIs) that specifically offer cryptocurrency trading as their core business module.

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It is even interesting to find out that two of Nigeria’s leading gateway payment platforms – Flutterwave and Paystack are now integrated on certain platforms like Luno, another prominent P2P cryptocurrency trading platform.

Not just that, there has been an increase in the number of services that accept cryptocurrency as a payment option.

Just recently, Piggyvest, an online saving and investment app, added a cryptocurrency API to its platform, allowing its users to invest in bitcoin.

Guess what? That’s just one of many platforms that have adopted cryptocurrency as either a transaction option or a core trading business module.

Now, CBN’s ban will drive cryptocurrency underground.

This is sure to trigger another black market that the apex bank might not be able to control.

Putting an end to all of this step forward would equal a major setback in the Nigerian fintech sector.

What does the new CBN directive mean for foreign investment?

While we are still figuring out the CBN’s intent on its latest move to halt cryptocurrency trading in Nigeria, it appears to be a terrible action to take for many reasons.

One of these reasons includes the negative impact on foreign investment.

Except for unknown reasons, no foreign investors will be impressed by the new directive.

For one, it is obvious that the government has made its choice based on unfounded justifications i.e, identifying risk as a significant excuse where the stock market and forex trading still thrive.

It is even far-fetching considering that Nigeria’s Securities and Exchange Commission (SEC) had previously set up a committee to create a framework for the regulation of digital assets and local crypto exchange in Nigeria.

However, the government seems to have quickly lost interest towards that end.

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Undoubtedly, this kind of reckless decision by CBN rubs badly on the Nigeria economy as a whole, making it even difficult for foreign investors to invest in the country.

One of the advantages is that of cross-border payment especially at a time when the Naira is failing.

In comparison, the US Treasury’s Office of the Comptroller of the Currency (OCC) approved Anchorage as the first Crypto Bank in the country, marking another breakthrough for the crypto world.

One would have even thought that Nigeria, which currently ranks 2nd in terms of crypto market volume, will also devise a way of generating revenue from the growing market or perhaps come up with strategic regulations.

On the contrary, the nation’s apex bank decided to end the rapidly booming market.

Nigerians react to the new directive

Like every other time, the new directive has been heavily criticized by many Nigerians.

Some have taken to their social media pages to express their grievances.

Below are some comments from Twitter feeds:

Meanwhile, there have been a couple of conspiracy theories making rounds already.

Controversial journalist, Dr. Kemi Olunloye, linked the ban on crypto trading via local banks to Jack Dorsey’s visit to Nigeria for “Bitcoin meet ups”.

On the other hand, some Nigerians feel the government could have done better.

This is because governments of other countries are creating new opportunities tailored around the use of cryptocurrency.

What do you think about the new directive by the CBN? Kindly share your thoughts in the comment section below.

Oyinloye Bosun is a writer at Techuncode. Although not a gadget freak, he has a keen interest in familiarizing himself with every technology product - software or hardware. He also loves to arm himself with the knowledge of tech activities/events taking place both on the Local and International scenes. The provision of the above has pushed him to choose writing as a profession. Wondering if he has a hubby? Yes! He loves streaming tech-related podcasts in his spare time.

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