CBN’s Restrictions on Cryptocurrency and the Effects on Nigeria’s Economy

The Central Bank of Nigeria (CBN) has ordered all Nigerian commercial banks to freeze the accounts of at least two individuals who are said to have been trading in cryptocurrency.

Last Sunday, Gazette reported that a Post-No-Debit circular was signed and addressed to the banks on November 3, by the CBN’s Director of Banking Supervision, J.Y. Mommanand stated that the accounts of the alleged crypto users should be frozen and moved to the “suspense account”.

Godwin Emefiele, the CBN’s Governor has claimed that most of the crypto transactions through commercial banks in the country were “illegitimate” and that the currency poses a threat to Nigeria’s economy hence the ban on crypto in the country.

Threat! Really?

“Nigeria’s crypto market boom is driven by the depleting value of the naira, which has seen the local currency depreciate by over 100% since 2015,” said Anthony Okafor, an adjunct professor of Finance at the University of Louisville.

According to Mr Okafor, “in an economy mired by hyperinflation and a high unemployment rate, investment in cryptocurrencies is emerging as a leading investment outlet and a means of preserving wages and wealth”.

Crypto has also helped the economy by offering greater liquidity thereby helping Nigerians to exit the local currency.

‘In the first half of 2021, Nigeria led Africa’s peer-to-peer(P2P) trading volume reaching $205.7 million, with Paxful accounting for 77.2% and local Bitcoins accounting for most of the rest(22.8%).

Inflation. Crypto to the rescue.

Unemployed Nigerians have been able to generate income using cryptocurrency, as traditional jobs steadily become obsolete due to emerging technologies.

Per Coindesk, there are jobs available for those who can create crypto/blockchain products for businesses, develop crypto-related products, audit smart contracts, perform crypto forensic audits and manage projects.

Any effect?

The ban has had effects on some people in Nigeria, especially among the youths and some stakeholders in the country.

Oluwale Adebimtan, a crypto trader told TheCable that “the policy might lead to the death of some local fintech companies given that a lot of Nigerians invest money in the cryptocurrency industry, especially fintech where people can easily buy and share cryptocurrency and because these platforms are there”, he said.

“With the ban on crypto, most of those companies won’t see much inflow. The fees charged are what these organizations use to sustain themselves aside from trading or taking advantage of the fluctuations. So it is possible that most of these companies will lay off some of their staff thereby raising the unemployment level in Nigeria”, Adebimtan said.