CBN And The Rise Of Cryptocurrency

By Fola James

The Central Bank of Nigeria’s quest to stop crypto currency trade in Nigeria has been spurned by many Nigerians, particularly youths who have embraced it as a way out of the country’s massive unemployment problem as well as an alternative payment system.

The Godwin-Emefiele-led CBN had on February 5 directed commercial banks and other financial institutions from allowing their customers to trade in the digital currency, citing security issues such as terrorism and fraud.

In spite of this, the digital trade among Nigerians has not abated as indicated by a report by IC Intelligence Insights which ranked the Nigeria third in global currency trade. The report which said the trade has been revolutionalised in the country, said investment and payments have become seamless as more people in the country are taking advantage of the global digital payment system which was first banned in 2017 by the CBN who four months ago reinforced the ban.

The report said, “Of the top 10 countries trading cryp­tocurrency volumes, Nigeria ranked third after the US and Russia in 2020, generating more than $400m worth of transactions.”

Obviously, the apex bank has failed in its quest to demonise cryptocurrency which is gradually replacing cheques and cash in the payment ecosystem, according to Dr Desne Masie, the Chief Chief Strategist & Editor of Insights Newsletter, IC In­telligence, who said cryptocurrecny trade surged significantly in the last one year.

According to him “Bitcoin enjoyed a surprising surge of about 1,000% over the past year, more than quadrupling in value and outstripping stocks and gold, with Tesla’s $1.5 bil­lion Bitcoin purchase making headlines and many investors desperate to get-rich-quick in a world of uniquely low inter­est rates.

“With the trend of the seg­ment of the market, it may be of course that all money changing becomes digital in the end. Millennia ago it happened through barter­ing. Then progressed via metal items of exchange into currencies based on physical notes and coins. Followed by cheques and telex transfers, then interbank electronic exchanges. Now personal banking via Apps on mobile phones is widespread.”

He said many Africans, particularly Nigerians have embraced bitcoin as a preferred mode of payment, noting that the traditional transaction systems are losing momentum.

“In 2016, I was startled to witness in a Kampala open-air market impoverished women paying for bananas and vegetables on their mo­bile phones; stall holders standing in the dust were happy to accept money that way. And of course money exchange via mobile phone is now widespread in Africa, as well as elsewhere.

“Meanwhile, more cryp­tocurrency trading goes on in Nigeria than almost anywhere else in the world, reflecting a loss of faith in more traditional forms of in­vestment,” he said.

The CBN’s ban has not been well received by many Nigerians, including Vice President Yemi Osinbajo who said the apex bank was wrong to issue a blanket ban when it should be regulating the cryptocurrency trade for the benefit of Nigerians.

Osinbajo said “Rather than adopt a policy that prohibits cryptocurrency operations in the Nigerian banking sector, we must act with knowledge and not fear and develop a robust regulatory regime that is thoughtful and knowledge-based.”

He said digital currency is the future of the global payment system and Nigeria cannot be allowed to be left behind because “there is no question that blockchain technology generally and cryptocurrencies, in particular, will in the coming years challenge traditional banking, including reserve (Central) banking, in ways that we cannot yet imagine.”

According to checks, the most popular cryptocurrency transacted in Nigeria is Bitcoin, but others like Dogcoin and Ethereum are also dominant while more cryptocurrencies continue to be created from time to time, by many youths in Nigeria who have found transactions in cryptocurrencies profitable and rewarding.

This group of Nigeria have chosen cryptocurrency as a livelihood, according to Kingsley Moghalu, a former Presidential aspirant and CBN Deputy Governor who said the apex bank should rather work out a regulatory frame work to regulate the trade rather than banning it outright,

According to him “I think that there is need for a very serious study about this thing because many Nigerians are involved in cryptocurrencies. If your country is number 10 in the world usage of cryptocurrencies, I do not think that it is a wise approach to either ignore or banish it.My recommendation to the CBN is to really take a deep look of this whole thing and perhaps look at the possibility of the issuance of its own digital currency as China, Sweden and Uruguay and other countries are doing. What you do not know can be scary for you.

“If you think that you are too scared of what you do not know, then you will lose many opportunities and a lot of things will be happening under your nose because you pretend that it is a bad thing and you do not like it,” Moghalu said.

The former CBN top notch emphasised the need for the Securities and Exchange Commission (SEC) to launch an investment education campaign to educate Nigerians about the risks associated in trading in cryptocurrency.

“I think the CBN should be imaginative and deploy risk management approach to cryptocurrency. Investments are risks that are personal to the investors as long as they do not affect systemic stability. I think this is the attitude we should take in respect of crypto currency,” he said.

He also debunked the argument that digital currencies are channels for fraud and money laundering, insisting that no payment system is devoid of fraudulent and criminal practices.

Laoye Jaiyeola, Chief Executive Officer of the Nigeria Economic Summit Group, NESG, said checking excesses in crypto trade is a challenge, he noted that the country cannot afford to be left out of the digtal payment revolution.

According to him “Cryptocurrency transaction is a challenge that people grapple with all over the world. While we institute the ban, we should undertake a comprehensive study to understand how it works. We have been told that they can easily be deployed to fund criminal activities, but it has come to stay, and if we are going to allow it in future, we should start learning about it now.”

A report by UsefulTulips said bitcoin volume traded in Nigeria in 2020 amounted to  $353,482,254, even though analysts insist that the figure is conservative, putting the actual figure at over $400 million. The figure could rise further to as much as $1 billion or more in few years, according to financial analysts who said more Nigerians are embracing digital coins as a modern payment system.