By Fakhriya M. Suleiman, MA Global Media and Postnational Communication
On 5 February 2021, the Central Bank of Nigeria (CBN) issued a communiqué stating that ‘dealing in cryptocurrencies or facilitating payments for cryptocurrency is prohibited.’
In line with this directive, the CBN ordered the immediate closure of all accounts operating cryptocurrency exchanges.
The CBN said this latest directive was a reiteration of their January 2017 circular. In 2017 they stated that in light of the emergence of virtual currencies (VCs) in Nigeria, which are ‘susceptible to abuse by criminals, especially in money laundering and financing terrorism,’ financial institutions should not ‘use, hold, and/or transact in anyway in VCs.’ The circular also went on to say that Bitcoin, Dogecoin and other VCs are not considered as legal tender by the CBN.
This directive comes as Nigeria was identified as having the second largest peer-to-peer (P-2-P) Bitcoin market in the world and the largest in Africa.
Analysts have anchored Bitcoin’s success in the federal republic with the rise of crypto-based startups amid the devaluation of the Naira during the Covid-19 pandemic.
According to Techpoint Africa, Nigeria traded $32.3M worth of Bitcoin in October 2020 alone.
“The CBN argued cryptocurrency facilitated criminal activity in Nigeria given the ‘anonymous nature of [its] users and patrons.’”
For the CBN, this strike against the nation’s cryptocurrency industry was done to curb ‘illegal transactions such as money laundering and drug trafficking.’ The CBN argued that cryptocurrency facilitated criminal activity in Nigeria given the ‘anonymous nature of [its] users and patrons.’
During a briefing with a joint Senate Committee on Banking, Insurance and Other Financial Institutions, ICT and Cybercrime, and Capital Market, the CBN’s governor justified this move. Governor Godwin Emefiele had said on 23 February that the Central Bank had acted in the ‘best interest of Nigerian depositors and the country’s financial system.’
While the International Monetary Fund’s representative for Nigeria, Ari Aisen, agreed with the CBN’s directive citing that ‘some central banks, not only in Nigeria [share] the concerns about […] the [kind of] activities these crypto currencies’ are involved in, this move has served to fuel greater distrust and anger from Nigerians towards the federal government.
Bitcoin, for example, has been very instrumental for the anti-police brutality EndSARS movement. In 2020 it emerged that those associated with the movement had their bank accounts frozen, causing many to turn to what CoinDesk referred to as ‘unconfiscatible [cryptocurrency] bank account[s]’ to circumnavigate the watchful eye of the federal government’s clamp down.
CoinDesk’s Hannah Akuiyibo argued that use of VCs by the EndSARS movement may have influenced the CBN’s decision to outlaw cryptocurrency, with pressure to do so coming from the central government.
Yele Bademosi, CEO of Bundle Africa, sees this decision as a ‘losing battle’ for the CBN. Bademosi highlights that Nigerians are very cryptocurrency savvy, especially young Nigerians who would prefer to ‘download a crypto wallet and have quick access to financial services, compared to having to go to a bank.’ He went on to say that amid a ‘broken governance and finance system’ in Nigeria, it is important for young Nigerans to be able to be in a position where they are not ‘dependent’ thereof.
Despite the CBN’s directive, the crypto industry still remains very active. An anonymous Bitcoin user told CoinDesk that ‘there’s no stopping crypto, [it’s] the future and we won’t let some old fools take our future from us.’ Analysts suggest that Nigerians will most likely turn to P-2-P platforms to continue trading.
Nigeria’s vice president, Oluyemi Osinbajo, sees the CBN’s decision as hindering Nigeria’s ‘efficiency and progress.’ While he understood the concerns surrounding the misuse of VCs in Nigeria, he instead argued for the ‘regulation, not prohibition’ of cryptocurrencies.
Photo caption: The Central Bank of Nigeria’s decision to prohibit the use of cryptocurrency has sparked national debate. (Credit: via WeeTracker)