The CBN (Central Bank of Nigeria) circulated a letter on the 5th of February to all financial institutions to close the accounts that are transacting and operating in cryptocurrency in Nigeria.
This abrupt and knee-jerk decision took many by surprise in Nigeria’s financial and fintech sector. In recent months Nigeria was garnering a lot of attention around cryptocurrencies and was quickly becoming a leader in the region. In-fact it was declared number 2 in the world in the rapidly growing crypto marketplace.
In the last five years, Nigeria has traded 60,215 bitcoins, valued at more than $566 million which, apart from the US, is the largest volume worldwide on Paxful, a leading peer-to-peer bitcoin marketplace.
The latest news from the CBN aims to bring this emerging marketplace to a screeching halt. Tech-savvy Nigerians have been quick to embrace cryptocurrency in Nigeria, which are easier to navigate than the restrictive and cumbersome banking processes in the country.
Legal Tender?
Bitcoin is perhaps the best-known cryptocurrency in Nigeria. It is based on Blockchain technology and as we detailed in a previous article – it has the potential to change the way currently deal with commerce, banking, and – real estate. Cryptocurrencies are not technically considered legal tender but rather treated as property.
Cryptocurrency in Nigeria have never been recognized as legal tender in financial institutions and therefore the latest declaration about closing accounts in-effect has little consequence on how cryptos are handled since they have never been integrated into Nigerian financial institutions.
Individuals can trade in Bitcoin or other currencies, however, they will be forbidden to use financial institutions as a facilitation harbor for their transactions.
Ramifications for Real Estate?
This new edict from the CBN will stifle investment activity in the country (something that we should be trying to stimulate) and will deter both foreign and local investors from venturing into real estate business activities.
We need as much investment as possible in the Nigerian real estate sector, with a massive housing deficit and an informal housing crisis – this is not the time to further constrict activities that can help uplift the Nigerian real estate scene.
Former Vice President Atiku Abubakar came out against the CBN decision and exclaimed that it will restrict capital flow into the country.
“Already, the nation suffered severe economic losses from the border closure and the effects of the COVID-19 pandemic.”
“This is definitely the wrong time to introduce policies that will restrict the inflow of capital into Nigeria, and I urge that the policy to prohibit the dealing and transaction of cryptocurrencies to be revisited.”
“It is possible to regulate the sub-sector and prevent any abuse that may be damaging to national security. That may be a better option, than an outright shutdown.”
Former Vice President – Atiku
What’s next?
We do not anticipate this to completely derail the crypto scene in Nigeria, since Nigerians will still find ways to deal in the currency of the future.
The government claims that terrorists and drug dealers use cryptocurrency in Nigeria as cover for their illegal activities and that is part of the reason to close all accounts associated with this type of currency. It is still possible to regulate and monitor these accounts for illegal activities while allowing the vast majority of citizens to use the currency for investment and business purposes.
The Nigerian government always seems to get in the way of progress. Instead of being a roadblock and obstacle, they should be conduits for legal business activities.
Blockchain technology will be the framework that runs the future of finance and all commerce, so it would be wise for our leaders to embrace it and harness it to our benefit.
Nigeria stands to be leader in cryptocurrency worldwide – only of the government would get out of the way.
