Nigeria tried to crackdown on cryptocurrencies, but it didn’t work. Why?
Bitcoin has been on a journey since 2009 as the cryptocurrency has seen grossly fluctuating prices, recently hitting $60,000 in March 2021 before dropping to half of that amount weeks later.
Still, the global market value for all cryptocurrencies is over $1 trillion. That’s a staggering number considering cryptocurrencies have not been exempt from skepticism. Most recently, this mistrust has come from Nigeria.
In February, the Central Bank of Nigeria (CBN) ordered banks to close accounts that were conducting transactions in cryptocurrencies. The news came as businesses were struggling alongside the country’s economy and started to use cryptocurrency as an alternative to naira, a national currency vulnerable to depreciation, to make a living. Nigerians saw cryptocurrency as an opportunity to navigate the country’s complicated banking system, which is why the ban felt sudden and unjust.
Cryptocurrency educator Chuta Chimezie said the CBN sent the memo to financial institutions but didn’t give industry participants the chance to rebuke it. Chimezie said this illustrates how little is known about the country’s cryptocurrency ecosystem. Either way, the past few months have demonstrated that the CBN’s actions haven’t carried much weight. In an interview with CoinDesk, one anonymous Nigerian Bitcoin user said: “There’s no stopping crypto. Using crypto is a way out of poverty…”
Since February, crypto use in Nigeria has continued its upward trajectory. One month after the government’s ban, a survey found that 32% of respondents in Nigeria use digital currencies. Similarly, Chainanalysis, a blockchain research firm, discovered in May that Nigeria received $2.4 billion worth of crypto. It’s clear the industry is thriving under pressure, but why? Why are Nigerians still using, and therefore, legitimizing crypto despite the ban?
In June 2021, Nigeria’s inflation rate was around 18%, causing the naira to lose value. But Bitcoin allowed Nigerians to hedge against the currency’s inflation. This is because BTC can sometimes act as a proxy for the US dollar, which is hard to obtain but high in demand since most goods Nigerians buy are imported from the United States. According to Keith Mali Chung, co-founder of Loopblock Network, more than 70% of what’s consumed in Nigeria is imported, and because of financial restrictions, Bitcoin has gained attention.
Accepted By Dominating Industries
Another reason the ban hasn’t stuck could be because promising industries in sub-Saharan Africa view Bitcoin as a valid payment method. This is especially true in the entertainment and hospitality industries. For example, online gambling is a popular form of entertainment in Nigeria and South Africa, with Nigeria’s online gambling market forecasted to be worth 128 million in 2023 and South Africa’s around $2 billion the same year.
Previously, players could only pay using SA Rands, but African casinos have started to accept Bitcoin as valid payment, including South Africa’s own Yebo Casino. Much of this attraction to the inclusion of Bitcoin is because players don’t have to be concerned about security, as transactions don’t involve an intermediary, and that they can still play for real money. Similarly, Nigeria’s bustling hospitality industry, which grew by 20% in 2018, has adopted Bitcoin, including luxury operator George Residence.
It hasn’t helped that the Nigerian government’s crypto ban lacked clarity. Many were confused in the beginning, and even more so after the CBN came out later and said they never banned crypto activity in Nigeria. Rather, the February order was a reiteration of an already imposed 2017 ban on financial institutions facilitating cryptocurrency transactions.
In Nigeria, cryptocurrencies help individuals make a living, avoid trade restrictions, and they’re already integrated into mainstream sub-Saharan African industries. The Nigerian government’s crypto ban didn’t make sense in February, and months later, the same looks true.