The decentralized finance world is often viewed as speculative and manipulative as it falls outside the scope of central government jurisdictions. The case of Nigeria is no different. Even though Nigeria is a significant force in the worldwide cryptocurrency industry, the country has imposed several bans and scrutinizing measures at different times.
In this article, you will read about the current status of the Nigerian cryptocurrency market and how the regulatory measures by the Central Bank of Nigeria (CBN) will shape its future.
Some Facts About The Nigerian Cryptocurrency Market
Here are some facts about the status of cryptocurrencies in Nigeria.
- The total revenue in the Nigerian cryptocurrency market is projected to reach $32.58 million in 2024.
- The average revenue per user in the Nigerian cryptocurrency market amounts to US$7.03 in 2024.
- It will see an annual growth rate (CAGR 2024-2028) of 12.66% whereby the projected total amount of revenue of the sector will reach $52.49 million by 2028.
Today Nigeria is among the top six countries in the world in terms of crypto adoption. The country has achieved this status despite the turmoils and regulatory constraints that have disrupted its easy flow in the last few years.
History Of Crypto Adoption In Nigeria
The active history of crypto adoption in Nigeria began in 2020 when Binance added Naira, the native currency of Nigeria, to its list of peer-to-peer trading platforms. This gave a platform for the Nigerian traders to buy and sell cryptocurrencies using Naira. Many other crypto trading platforms started their business in Nigeria, following the path of Binance.
Everything went well till February 2021, when the Central Bank of Nigeria prohibited the Nigerian financial institutions from transacting cryptocurrencies. This move was in the wake of the allegations that decentralized finance was becoming a breeding ground for money laundering and terrorism financing activities. Despite such bans, the volume of crypto transactions in Nigeria grew by 9% to $56.7 billion between July 2022 and June 2023.
In September 2023, the market got another blow in its head when the Nigerian government took a stand that the activities of Binance were illegal and cryptocurrency investments would cause a total loss.
The latest developments regarding the ban on cryptocurrencies in Nigeria came out in May 2024, when the country banned all peer-to-peer transactions of cryptocurrencies using Nigeria’s official currency Naira.
Factors That Will Affect The Future Of Cryptocurrencies In Nigeria
In the latest development, the Nigerian government is planning to impose a tax on cryptocurrency. This decision can have dual implications. It may mean that the government is planning to promote cryptocurrencies by making them legal through taxation. On the contrary, this decision may take investors further away from crypto adoption as they have to pay additional taxes for every transaction.
Another development viewed as pro-crypto adoption is that two new cryptocurrency exchanges, Busha and Quidax, were given official licenses to start functioning in the country. Moreover five crypto asset startups namely Trovotech, Wrapped CBDC, HXAfrica, Dream City Capital, and Blockvault Custodian were inducted into a pre-registration regime that was designed to “test run” the digital asset business models.
These developments can be a sign that the Nigerian government starting to realize the importance of adopting cryptocurrencies as a palpable payment method. This can also be a step in gaining back the trust of the investors in the Nigerian capital market. The fact that Nigeria houses over 60% of the crypto trading volume in the African continent increases its potential as a platform for asset investment and other businesses related to crypto trading.
However, we should not overlook the fact that these ease in the restrictions are not full-fledged green signals to crypto adoption. Even though these sanctions come under the country’s Accelerated Regulatory Incubation Program, we can hope that the scene will be cleared for more crypto adoption in the coming years.
The Bottom Line
Crypto regulations of some sort are inevitable due to the fraud that can happen in this field. Even though Nigeria has eased some restrictions, we cannot expect the country to free the industry from all the regulatory strangleholds. The future of cryptocurrencies in Nigeria would prosper if the government implements calculated measures that bring in more investments.
