Cryptocurrency Ban: Possible Effects On Trade in Nigeria and West Africa
The acceptance of cryptocurrency as a means of exchange has been on the rise in Africa. In recent times, Africa has witnessed an increase in crypto ownership, trade volume and regulation.
It's worthy of note that, the apex bank's notice is not a direct ban on Cryptocurrency. The CBN does not have such power to ban or criminalise crypto any more than it can ban the dollar, euro, or cedi. Rather, what it seems to do is ensure that organisations regulated by CBN no longer facilitate or participate in cryptocurrency transactions.
A report published by Arcane Research and Luno stated that African nations such as Uganda, Nigeria, South Africa, Ghana and Kenya are among the top 10 countries in a google search about bitcoin. The report titled, "The State of Crypto in Africa", recognises Africa as one of the most promising continents for the adoption of cryptocurrencies. The report shows that African countries share key similarities and trends despite the continent being so diverse. Economic problems ranging from high inflation rates and volatile currencies to financial issues such as capital controls and lack of banking infrastructure create a fertile ground for an alternate financial platform. Apart from Bitcoin, other cryptocurrencies such as Dash and Lisk are used in African countries including Botswana, Ghana, Kenya, Nigeria, South Africa and Zimbabwe. On the back of the formidable success of mobile money in Africa, an attempt to capture the African crypto market is driven by increased investment interest in cryptocurrencies. The announcement made by Twitter CEO, Jack Dorsey, that he has an interest in cryptocurrencies in the African market makes it more fascinating. as Cryptos have become very popular in Africa. Costly remittances and cross-border payments is also another factor plaguing Africa. Cryptocurrencies, on the other hand, can enable lower-cost and faster remittance payments. It is estimated that over 25 million people made cross- border payments from sub-Saharan countries in 2017. Remittances also account for a large share of gross domestic product (GDP) in sub-Saharan Africa countries. Remittances below $200 to sub-Saharan countries cost an average of 9% compared to the global average of 6.8%, while payments between countries are expensive. These higher percentages are attributed to inefficient and uncompetitive banking markets — and are reliant on legacy financial communications systems such as SWIFT. Nigeria is experiencing a surge in the adoption of cryptocurrencies, as the country has a number of local platforms that support purchases and sales of cryptos with the national currency. One such notable platform is Nairaex which is the largest local cryptocurrency exchange supporting several payment methods to buy and sell BTC including bank transfers and bitcoin remittance platform Bitpesa. According to reports, a growing number of Nigerian companies already accept payments in cryptocurrency.
Nigeria's crypto industry, which is one of the most developed in Africa, will also face serious scrutiny going forward. After a largely successful year in 2020, local crypto start-ups were expected to spread their tentacles. Potential fundraisers and acquisitions were even discussed at the beginning of the year. Those plans will be put on hold now as start-ups battle the uncertainty of the new regulation.
It's worthy of note that, the apex bank's notice is not a direct ban on Cryptocurrency. The CBN does not have such power to ban or criminalise crypto any more than it can ban the dollar, euro, or cedi. Rather, what it seems to do is ensure that organisations regulated by CBN no longer facilitate or participate in cryptocurrency transactions. Cryptocurrency in Nigeria appears to be peer-to-peer (P2P) transactions for now. Since ownership is not criminalised, everyday Nigerians can still own crypto and trade it among themselves without any hitches.
Godwin Anyebe