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October 18, 2021Cryptocurrency in Nigeria
It is no news that crypto is a big deal in Nigeria. Nigeria is one of the leading countries in the world when it comes to crypto adoption. A lot of people don’t want to miss out on the opportunities that cryptocurrency offers. This makes the number of people looking to buy bitcoin in Nigeria very high. The adoption keeps growing day by day despite the ambiguous legal status of digital assets in the country.
Nigeria doesn’t have a law that governs cryptocurrency yet, however, earlier this year, the Central Bank of Nigeria (CBN) released a statement that appeared to be a ban on the use of bitcoin as well as other digital assets in the country. While this was perceived by many to be the beginning of the end of crypto in Nigeria, the situation however took another turn as crypto continues to bloom and flourish in the country. The ban has had little to no effect on cryptocurrency usage in the country as many have adjusted to the current situation, crypto users have found new ways to buy BTC in Nigeria and continue their crypto trades.
Before going into why crypto continues to boom in Nigeria even with the ban, let’s look at the details of the crypto ban in the country. Read about blockchain technology and the RENEC blockchain.
Crypto ban in Nigeria
On February 5, the CBN released a ruling that orders all financial institutions to stop facilitating crypto transactions and desist from transacting with entities engaging in crypto. The statement also instructed all banks and financial institutions to close accounts of individuals or entities engaging in this type of transaction.
The CBN warned in the letter that breaches of the directive will attract severe regulatory sanctions.
This letter sparked a lot of reactions and caused a lot of confusion amongst the people as to whether they can still buy bitcoin in Nigeria and engage in crypto transactions. This prompted interviews with top officials of the CBN and they explained that the CBN release is not to discourage people from trading crypto but it shouldn’t be linked to the banking sector.
To clarify things, the CBN explained in a press release on February 7 that the circular was just to enforce the regulation that all banks should not involve in crypto trades, which has been in place since January 2017, stating that no new restriction was placed on digital assets. It also explained that crypto has been a tool to facilitate lots of illegal deals due to its anonymous nature and the directive is to protect the Nigerian financial system and also the majority of Nigerians from the risk associated with crypto transactions.
The CBN concluded that it is not comfortable with crypto and will not stop its effort to educate its citizens to stop using digital assets to protect the financial sector from cybercriminals.
While the CBN seems to have a good intention, a lot of people think the government needs schooling on crypto-related matters and its actions are deliberate and conscious steps to gradually wind down crypto in Nigeria.
However, things have taken a different turn because, despite the ban, crypto continues to thrive in the country. Let’s look at why and how crypto continues to thrive despite the ban.
The use of P2P for transactions
While the government ban has prevented all financial institutions and banks from facilitating any crypto transaction and also commanded that they shut down any account that involves in this kind of trade, crypto traders have found a way around this restriction. This ban has somehow limited the operations of traditional/centralized exchanges which are one of the most common ways people buy BTC in Nigeria. On centralized exchanges, people buy bitcoin with Naira directly from their bank and according to the statement released, if you carry out such a transaction, your account will be flagged. The solution to this is peer-to-peer exchanges.
After the ban, Nigerians turned to P2P exchanges for their cryptocurrency transactions. So while the ban was supposed to limit the number of transactions carried out in the country and affect the growth of crypto, Nigerians now trade on P2P platforms like Remita no. On P2P platforms, you don’t buy BTC with the Naira directly from the exchange but you buy from another person. The P2P exchange only serves as a marketplace to bring buyers and sellers together.
So on P2P platforms, the buyer transfers the worth of bitcoin or any altcoin he/she wants to buy directly to the seller’s bank account just like the normal inter-bank transaction and the seller sends the crypto to the buyer’s wallet through the exchange. No financial institution is needed to facilitate the transaction. When you send money directly from one account to another, it is almost impossible for banks to know the purpose of the transaction as it could be used for any other purpose. So P2P trades are difficult for the regulatory bodies to trace and it will be hard to fish out and shut down such accounts.
Cross-border transactions
Strict FX laws have been one of the factors that have aided the use and adoption of cryptocurrency in Nigeria despite the ban. A lot of people in the country have turned to bitcoin for foreign transactions, taking advantage of the decentralized nature of the currency. The ban does not affect the use of crypto for inter-border transfer so far it isn’t facilitated by a financial institution. Even before the ban, cross-border transactions have been one of the advantages of bitcoin over the naira and the ban has had little or no effect on it.
In conclusion, there are some other reasons why crypto continues to thrive in Nigeria. A lot of Nigerians use bitcoin to hedge against inflation as naira continues to lose its value, so crypto traders and investors continue to find ways to buy bitcoin in Nigeria. However, the stance of Nigeria regarding crypto is still not solid.
