The Central Bank of Nigeria (CBN) has issued a circular prohibiting banks and other financial institutions from facilitating cryptocurrency transactions and processing payments for cryptocurrency exchanges for fear of facing severe regulatory penalties.
The bank said the directive, which saw Binance and other exchanges suspend deposits in the country, is intended to “protect the financial system and the generality of Nigerians (including the youth population),” and that it will continue to do everything in its power to train Nigerians to refrain from using cryptocurrencies.
Read more: The Nigerian Crypto Ban Hasn’t Ended the Use of Digital Currency
However, this warning sounded to be a dead end. In fact, the appetite for cryptocurrency seemed to spread only gradually as more and more Nigerians turned to crypto to protect their savings and businesses from the decline of the local fiat currency, the naira.
According to data from Research Firm Chainalysis, the dollar volume of cryptocurrencies sent from Nigeria increased to $132 million in March 2021, a 17% increase from the previous month. Additionally, transactions in June increased 25% over the same month the previous year.
Owen Odia, the Nigerian head of global cryptocurrency business Luno, told List23, the CBN ban “did not stop the adoption [of crypto], it only pushed [it] underground, [as] people [switched to] P2P [peer-to-peer] transactions via WhatsApp.”
Odia stated that this is a clear indication that cryptocurrency adoption in Nigeria is going to stay. It’s also why regulators would be better off fully adopting it and establishing a framework that allows licensed players to operate in the space.
Bitcoin is no exception. According to Paxful, a P2P financial platform that has more than two million Nigerian users, commerce in the country alone accounted for $760 million of the nearly $3 billion worldwide volumes it recorded in 2021 — another indicator that consumers in developing economies like Nigeria are hungry for virtual currencies.
One of the main reasons for this increase, according to Odia, is the fact that digital currencies behave more like speculative assets, which people refer to as long-term investments that will grow over time and return a profit.
The significant contribution that digital currencies can play in facilitating cross-border international remittances is unmissable, as it speeds up the transfer process and reduces the amount of stress experienced by users.
“If you’re using a traditional banking system, you’ll probably have to contact three intermediaries, and when the money finally gets to the final beneficiary, you can imagine how much would have been taken from it and how long it would take,” Odia said.
eNaira will need to expand even more.
CBN might have imposed a crypto prohibition, but the bank is open to other types of blockchain technologies.
Nigeria became the first African country and one of the few in the world to adopt its own central bank digital currency (CBDC), the eNaira, as an alternative to traditional money in October last year.
Nigeria Aims for 8 Million eNaira users as Crypto Adoption Expands
The CBDC was launched with 500 million digital coins and integrated 30-plus banks on the eNaira platform. At the time, Nigeria’s President, Muhammadu Buhari, said the CBDC “can foster economic growth, enhance financial inclusion, and make monetary policy more effective,” ultimately increasing the country’s gross domestic product (GDP) by $29 billion over the next decade.
The CBDC’s evolution has faced several obstacles, with CBN Governor Godwin Emefiele accusing banks of “apathy” after a small 700,000 customers opened an eNaira wallet out of 55 million bank accounts in the country last year.
The fact that Nigeria’s traditional banking system is relatively well-developed, compared to other African countries, is a major contributing factor — and the eNaira will have to offer “something different,” otherwise there will be little incentive for people to adopt the CBDC.
She cited cross-border payments and possible interoperability with cryptocurrencies as areas that might help eNaira adoption grow.
Odia said she is a firm believer in the potential of blockchain both for Nigeria’s economy and for nations beyond its borders.
“Blockchain can transform the way business is done [in three main ways]: transparency, access to [real-time] information, and speed of transaction. I believe it will impact every sector, from the government sector to logistics, to the retail industry,” Odia said.
Further reading: How Nigeria’s eNaira rollout Can Influence the Future of CBDCs in Africa
Luno intends to play an important role in ensuring that this dream become a reality. She wants to educate consumers and empower at least a billion people by 2030, thereby enabling people to make informed decisions.