Nigeria joins The Growing List of Countries Banning Cryptocurrencies

When people list the advantages cryptocurrencies like Bitcoin and Ethereum have over other forms of currencies they list the following attributes:

1. It is decentralized unlike fiat currencies that are controlled by Central Banks.
2. No risk of inflation; individuals can preserve coins.
3. Reduced transaction fees.
4. No involvement of any third party.
5. Quick payments.
6. A safer ecosystem.
7. it offers lower fraud risks for buyers.

The most important benefit they point at is that they are generally not issued by any central authority, rendering them theoretically immune to government interference or manipulation.

However, the reverse is the case with the recent directive by the Central Bank of Nigeria to financial institutions instructing them to place restrictions on their customers dealing in cryptocurrencies. The letter also reminds them that they themselves are banned from trading in crypto currencies.

With this move, Nigeria joins the growing list of countries that have either outrightly banned cryptocurrencies or have implemented some form of controls that have curbed its widespread use.

Although the CBN did not outrightly ban the use of cryptocurrencies as a form of payment but it has effectively crippled  its use as the naira is required for anyone to purchase or sell it in Nigeria. To buy cryptocurrencies from exchanges online, one has to make a form of deposit into their bank accounts at an agreed fee in exchange for your desired cryptocurrency which will be deposited into your wallet or purse.

Below are countries that have placed restrictions on cryptocurrencies:

Algeria

Bolivia

Ecuador

Bangladesh

Nepal

Macedonia

China

Russia

Bolivia, Columbia, and Ecuador

Many of them citing the volatility of the form of currency as a reason for not approving it for payments.

For exchanges like Patricia, Flutterwave etc, the priority for them at the moment is to move their funds from local banks to cryptocurrencies as they expect a run on their business with lots of customers expecting to withdraw their funds.

The reasoning behind this move by the CBN was not immediately given but the letter stated that the directive took immediate effect. However, in statement issued by the CBN a few days later, the bank cited the anonymity cryptocurrencies provides, the trend of bans by different governments around the world, and how it serves as a conduit for “illegal activities including money laundering, terrorism financing, purchase of small arms and light weapons, and tax evasion”. The press release also features opinions of Warren Buffet who describes it as “rat poison squared, a “mirage,” and a “gambling device” and Andrew Bailey, the Governor of the Bank of England who cited the extreme price volatility cryptocurrencies suffers.

While many analysts and investors largely say good things about cryptocurrencies, some renowned investors like LendingTree Chief Economist Tendayi Kapfidze recently said that Bitcon is a pyramid scheme. He further said “you only make money based on people who enter after you. It has no real utility in the world. They’ve been trying to create a utility for it for ten years now. It’s a solution in search of a problem and it still hasn’t found a problem to solve.”

This is a reminder of the period when MMM crashed in Nigeria where three million people are estimated to have lost N18 billion according to the Nigeria Deposit Insurance Corporation, NDIC.

In recent times, the Nigerian government has embarked on some policies that have raised eyebrows like the handling of the #endsars protests that rocked the West African country’s commercial nerve, Lagos and other states in the South.

Despite numerous appeals by the teeming youths, the largest segment of the county’s population, to disband the dreaded Special Anti-Robbery Squad (SARS), this turned out to be a difficult task as the rouge police unit kept on operating despite several bans by the government.

The second most significant event that caused a ripple in the continent’s largest economy was when the government instructed all mobile and internet subscribers to link their National Identification Numbers (NIN) to their mobile phones. The problem with the directive was that the government gave only a two-week deadline or the sim cards who could not link their NINs were to be disconnected.

Another problem was that due to the COVID-19 pandemic the government had advised against gatherings of not more than fifty yet there were images of massive queues of Nigerians who thronged the NIN registration office circulating on social media. The directive was issued on the 15th of December 2020 while the deadline was on the 30th of December 2020 despite the fact that the timeline included the end of year and Christmas celebrations when government and business slow down their operations. However, several U-turns have been made with the deadline for registration now extended to the 6th of April 2021.

Nigerians who wish to trade cryptocurrencies would now have to search for solutions that would unfold in the next couple of weeks. A possible way out of this quagmire is that the affected parties taking the matter to court as in the case of India where its highest court overturned the government’s ban imposed in April 2018 which was imposed based on similar concerns of the CBN which are the lack of consumer protection and market integrity, and also money laundering.