Nigerians Had Traded Over $500m In Cryptocurrency Before The CBN Ban

On the 5th of February 2021, the Federal Government in a statement signed by the Director of Banking Supervision, Bello Hassan and the Director of Payments Systems Management Department; Musa I. Jomoh signed a Central Bank of Nigeria directive banning cryptocurrency in Nigeria.

To demystify what the statement means, one needs to pay attention. What the statement means is that Nigerians will no longer be able to make transactions relating to cryptocurrency by transfers or from their debit cards from any Nigerian bank or financial institutions. The statement as it mostly implies does not mean cryptocurrency ceases to exist in the country or it loses its value totally, rather it means that while they exist, still have value and remain legal, trading with them or using them as a means of transacting in Nigeria is completely impossible. The rule also specifically instructs banks that, “persons and or entities transacting in or operating cryptocurrency exchanges within their systems and ensure that such accounts are closed immediately.”

One factor which has driven the popularity of cryptocurrency is CBN’s stringent rules around foreign exchange in what has been a failing effort to stabilise the Naira.  In December 2020, Nigeria became the second bitcoin peer-to-peer market after the United States with over $560 million worth of bitcoin traded between 2015 and 2020.  That same month, the Central Bank instructed switches and processors to stop all domestic currency transfers in respect of foreign remittances through International Money Transfer Operators (IMTOs).

The ban does not mean that CBN has eradicated cryptocurrencies or that they cease to exist. What it means is that CBN has successfully put a barrier to the ability of exchangers to exchange cryptocurrencies for cash from bank customers. Since cryptocurrency is mostly bought online using options/services provided by banks and financial institutions, cryptocurrency businesses and startups are greatly affected. Examples of businesses in the line of cryptocurrencies that are affected are Patricia.ng, BuyCoins, Luno, etc.

The most important thing for businesses in the line of cryptocurrencies to do is to move their funds from the hands of their Nigerian banking partners. They should also begin to consider the possibility of other markets and moving their businesses to other countries (in and out of Africa) although that would take a lot of paperwork, time and resources but is not impossible.

Apart from the official document about the ban, the CBN is yet to make a public declaration about its decision and no one should expect a reversal of this policy; at least not in the nearest future if it’ll ever happen.

Irrespective of the big hole the ban on cryptocurrency in Nigeria has left (many call this another era of policy maker in Nigeria going overboard), cryptocurrency exchangers and business propose a possibility of a loophole in the ban that can be used to their advantage.