Nigeria’s Crypto Ban Fuels Mistrust in Government

Nigeria is committed to building its digital economy, but the central bank’s recent cryptocurrency prohibition counteracts this goal and fuels mistrust of the government.

“Governments and businesses all over the world are realizing the powerful potential usability of blockchain… Nigeria, however, is lagging due to the government institutions’ sore-footedness and refractory approach to this undeniably ingenious innovation.”

Hannah Akuiyibo is an Associate at the Woodrow Wilson International Center for Scholars in Washington, D.C

Related: Galaxy Digital, IOSG Lead $4.3M Funding Round for 'DeFi Bridge' Centrifuge

So states the draft National Blockchain Adoption Strategy released by Nigeria’s National Information Technology Development Agency (NITDA) in October 2020. The strategy makes the case for Nigeria’s adoption of blockchain technology, including digital currencies, to build a digital economy.

Yet, on February 5, many Nigerians were surprised and angered when the Central Bank of Nigeria (CBN) announced a ban on the exchange of cryptocurrency by financial institutions and directed banks to close accounts trading in crypto. 

Although CBN said its policy is a reiteration of a 2017 circular warning financial institutions about virtual currencies’ risks, this announcement is at odds with its efforts toward digital transformation. Following the announcement, the Security and Exchange Commission (SEC) paused its regulatory review of crypto pending CBN clarification. Meanwhile, the Senate has invited the heads of CBN and the SEC to brief them on this decision. 

See also: Nigeria’s SEC Puts Plans to Regulate Crypto on Hold in Light of Central Bank Ban

Related: Convergence Protocol Raises $2M in Funding Round Led by Hashed

As oil prices tumbled in 2020, taking Nigeria’s forex reserves and the value of the Naira with them, Nigeria entered a recession, and inflation stood at nearly 16%as of December. CBN has pursued several avenues for increasing forex liquidity in Nigeria, including requiring International Money Transfer Operators to distribute remittances in USD instead of Naira, cracking down on exporters who do not repatriate revenue, and restricting the use of forex for some imports. 



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