One Year Later; Nigeria’s Tale of CryptoCurrency Ban

Nigeria is one out of the many African countries known for the ease at which they impose restrictions on certain things and activities, most of these restrictions were not backed up by worthy explanations, in some other cases the adverse effects of such restrictions to the citizens of the country, the country’s economy and its position on the global market are not taken into considerations.

Over the years we have seen restrictions, bans, border closures supposedly aimed at curbing certain adverse effects becoming futile, Some others lasting longer than their purposes at the end of the day the purpose for such restrictions are defeated whilst the government refuse to own that their measures were faulty.

During the Covid19 scenario that drove the world to the walls of insanity, some states in the country gave orders that markets should be opened within a particular time, these states allowed market places to operate until maybe 2pm and after which, they were ordered to shutdown, and we ask the question, what purpose was achieved, was it that Covid19 can’t be contacted within the period they permitted the operation of markets? There can hardly be acceptable benefits numbered which can be said to be a result of the restrictions.

The price of commodities escalates when borders are shut down, yet the government makes no effort in having laid down plan to counter the effects of such.

On June 5^th 2021, the government of Nigeria officially banned Twitter, the ban restricted it from operating in the country. The ban occurred after Twitter deleted tweets made by the Nigerian Commander in chief of the armed forces, Twitter temporarily suspended, the Nigerian president Muhammadu Buhari, warning the southeastern people of Nigeria, predominantly Igbo people, of a potential repeat of the 1967 Biafran Civil War due to the ongoing insurgency in Southeastern Nigeria.

 The Nigerian government claimed that the deletion of the president's tweets factored into their decision, but it was ultimately based on "a litany of problems with the social media platform in Nigeria, where misinformation and fake news spread through it have had real world violent consequences", citing the persistent use of the platform for activities that are capable of undermining Nigeria's corporate existence. The issue raised so many questions owing to the fact that the then President of USA Donald Trump also faced such ban but the country made no attempt to resort to such measure  that was taken by the giant of Africa.

That being said, what might be regarded as the worst of these restrictions was on February, 5 2021 when the Central Bank of Nigeria (CBN) released a circular addressed to banks and other financial institutions directing them that all transactions made in cryptocurrencies and facilitating payment for cryptocurrency exchanges were prohibited.

Also the Central Bank of Nigeria (CBN) further ordered that all banks and other financial institutions should identify individuals or entities that transact in cryptocurrency or operate cryptocurrency exchanges and close down their accounts. To enforce this , the CBN had to fine deposit banks for violating its regulations barring customers from transacting in cryptocurrencies.

In justifying the ban, the Central Bank explained that cryptocurrencies transaction was devoid of proper regulation and prone to financial crimes.

Osita Nwanisobi who was the CBN Acting Director of Communications said that the directive was only a reminder of an earlier directive in 2017 banning cryptocurrency transactions.

He said that the fact that the anonymous nature of cryptocurrency made the digital currency prone to financial crimes, justified the ban.

“It is important to state that cryptocurrencies are digital or virtual currencies issued by largely anonymous entities and secured by cryptography.

“Cryptography is a method of encrypting and hiding codes that prevent oversight, accountability and regulation,” Words according to Osita Nwanisobi.

Crypto   in Nigeria as we know built a bridge to some barriers encountered in foreign transactions. It is a well known fact that Nigerian IPs, Identifications and Passports face unjust scrutiny in international fronts, there are many financial restrictions in the global market for Nigerian identities hence with crypto as a legal tender on international platforms, local users find an edge in trading without bringing the Nigerian Identifications to play.

Before the ban on cryptocurrencies a survey was carried out on the countries that trade cryptocurrencies and Nigeria was ranking the 6^th.

It has been a year since the crypto banking ban, and the outcome is now clear to all. First, the ban has extracted liquidity from sane, formalised exchanges, and pushed it into the black market where there is anonymity. While terrorists and kidnappers might have struggled to move large volumes via crypto in the past due to concentration of liquidity on formal exchanges, they will now struggle less as liquidity pours into the black market where they can freely transact outside the radar of law enforcement. On-chain data shows that the crypto transaction volume in the market has not dried up, but has continued to grow, only now more so in the grey and disaggregated black market where users are exposed to unscrupulous third-parties daily. Local exchanges now function to provide some security for peer-to-peer fiat-to-crypto transactions with tools like escrow services, or operate exclusively to facilitate crypto-to-crypto transactions. Indeed, the crypto banking ban has only succeeded at squeezing out good actors from safe transacting environments and made them counterparties with (and market-makers for) bad actors. Since the transaction volumes in the market will continue to grow, taking the outcome of other central bank bans across the world as examples, whatever FX impact the ban was also intended to influence will not be verifiable. As it is already evident, the FX pressure in the market has not yet eased one year later.

I would say that although the central back in a way has fractured the official usage of cryptocurrencies but more people in the country especially the youths have embraced the usage of cryptocurrencies while floods of people are grappling to join the crypto wagon. Come to think of it with the economic crisis the country has been subjected to, the skyrocketing price of commodities, the incessant falling of Naira our legal tender, nobody should judge this generation for trying to hold on to what might be their ultimate salvation even when their beloved country felt it was not the best thing for them.

Nigerians in this one year of the ban has found a way to go around those hurdles while retaining a diehard spot in the crypto---holding and trading market.

Pair to Pair (P2P) Transactions: Notably, the government ban totally crippled the facilitation of Crypto transactions by financial institutions, in the relentless effort not to relinquish this poverty alleviation platform created by introduction of these digital currencies, crypto traders discovered a way out of this situation. Initially one can buy these cryptocurrencies straight from the bank leveraging the Naira in their bank accounts but if you try it now, you can officially wave a goodbye to that account, courtesy of CBN policy on 5^th February 2021.

Yes the restriction placed on cryptocurrency trade was aimed at limiting the number of transactions carried out in the country which was allegedly said to affect the economy (NB: Before the ban one dollar was exchanged for about three hundred and eighty one naira but then one year after the ban a dollar goes for about four hundred and sixteen to five hundred and sixty naira) Nigerians has resorted to what we call the P2P platforms. This is a virtual platform where buyers meet the sellers, it serves as the market place. On this platform the seller transfers the bitcoin to the buyers wallet while the buyer sends its equivalent cash value to the sellers account. Here the bank can never trace the source of that transfer to bitcoin transaction as it can be fund generated from the million ways of making money today.

Apart from the P2p Platforms, Nigerians also make use of cryptocurrencies for cross border transactions. This crypto ban has no effect on international platforms so inter-border transfer is still possible as long as no bank or any financial institution is involved, most of the Forex trading platforms can be funded by these cryptocurrencies as well.

Survey still has it that this year 2022, almost thirty four million Nigerians have traded on crypto and the youths account for this population. Notwithstanding, many people are hell bent on venturing into this crypto trading and almost all the people still in crypto are not dreaming of caving in to the quitting mentality the country wished to subject them to rather they are much willing to increase their crypto holding and trading capacity.

The sudden introduction of E-Naira which is stated to be Nigeria’s official digital coin has spurred up mixed reaction as to whether the Nigerian government will one day see it sensible enough to lift the ban upon cryptocurrency. This is one question we might not be able to answer in this blog but based on facts I guess we can say that willy nilly, cryptocurrency trading has come to stay and will stand the test of time, prejudice and persecution it will likely face in the hands of Nigerian government and other governments alike.