Nigeria, once the nursery for cryptocurrencies, is taking the world awry with its recent hostility to digital currencies.
After a legendary boom in crypto adoption, Nigeria is now seeing a blanket ban on cryptos. The reason for this change in the crypto landscape in Nigeria is worth evaluation.
The History of Cryptocurrencies in Nigeria
Nigeria was a favorable soil for the cryptocurrencies in the beginning stages of these digitized coins.
The young population of Nigeria adopted cryptocurrencies as a means of investment to safeguard their finances from price fluctuations due to global economic crises.
The innovative technology used in the cryptocurrency space and the chances for entrepreneurship the platform gives to the younger, tech-savvy generations were the major reasons for the initial boom of cryptocurrencies in Nigeria.
Moreover, the decentralized sector gave the users freedom and ease of use that the traditional financial system failed to deliver. Nigeria became the capital of digital currencies in the initial period of its emergence due to its openness to reforms.
The general love for cryptocurrencies in Nigeria was also due to the instability of the country’s official currency Naira.
With the emergence of stablecoins, people left the official currency and invested in stablecoins, which were pegged against the US dollar. In short, crypto had a good market in Nigeria during its initial years.
Bans by the Nigerian Government on Cryptocurrencies
In the wake of global scams and failures in the decentralized financial sector and the increasing failure to regulate cryptocurrencies, the Nigerian government’s attitude towards cryptocurrencies changed.
The government tried to put a stop to the unrelenting growth of cryptocurrencies in the Nigerian market through a series of bans.
The Nigerian financial sector is largely ruled by the Central Bank of Nigeria Act of 2007. This act was passed before the emergence of cryptocurrencies, so it does not have provisions to regulate them.
The Nigerian government set up a commission in 2016, jointly constituted by the Central Bank and the Nigeria Deposit Insurance Commission (NDIC) to investigate the alleged use of Bitcoins in Ponzi schemes.
In 2017, the Nigerian Securities and Exchange Commission (SEC) made it clear that crypto transactions do not belong to the network of financial transactions covered by any insurance schemes.
The Central Bank instituted the provision of anti-money laundering for institutions that engaged in cryptocurrency transactions.
The actual ban on cryptocurrencies, after a series of warnings, happened in 2021 when the Central Bank of Nigeria froze the accounts of people who made cryptocurrency transactions.
The peculiarity of the bans in Nigeria is that there are no clear-cut descriptions of the types of bans or their provisions. Crypto laws in Nigeria were ambiguous and vague.
The latest news of the ban on cryptocurrencies in Nigeria came out in May 2024, when peer-to-peer transactions of cryptocurrencies using Nigeria’s official currency Naira were banned.
The country has been in a legal battle against major global cryptocurrency exchanges such as Binance and OKX exchanges.
The country has imprisoned one of its executives since February this year. OKX has made its exit from the country final. Many other prominent exchanges have shown their discontent toward Nigerian policymakers by disabling P2P transactions between Naira and other cryptocurrencies.
The Future of Cryptocurrencies in Nigeria
Despite the regulatory strongholds and general skepticism of the government, analysts see a prospective future for cryptocurrencies in Nigeria.
The Nigerian financial landscape will grow to accommodate decentralized finance and is expected to realize the use cases of the same. For instance, many investors are hopeful about the use of cryptocurrencies in uplifting the agricultural and educational sectors of the country.
The utility of blockchain technology is anticipated to be so strong that the food insecurity of the country can be solved to a large extent.
Incorporating cryptocurrency in education is the best way to make use of the most modern technology to advance the learning outcomes of the population.
The Bottom Line
Cryptocurrency exchanges and other agencies in Nigeria are devising plans to counter the general disinterest of the government through innovative use cases such as employing stablecoin for inflation-free investments, creating crypto cards for easy transactions, and the like.
The present bans on the market are not thought to sound the death knell of cryptocurrencies in Nigeria.
The sector dynamics will find a way to wade through the regulatory strongholds and emerge good.
