Nigeria’s cryptocurrency landscape has experienced ongoing turmoil, with citizens embracing digital assets while the government remains steadfast in its opposition.
In response, the government has enforced a ban on cryptocurrencies, prohibiting individuals from engaging in crypto transactions through their bank accounts, prompting the central bank to provide clarifications on their motivations for the ban.
Anonymity and inflation risks
Deputy Governor of Economic Policy of the Central Bank of Nigeria, Kinsley Obiora, shed light on the motivations behind the ban on cryptocurrency transactions during a retreat in Abuja.
Speaking at the Business Session of the Fiscal Liquidity Assessment Committee (FLAC), Obiora expressed concerns about the anonymity of digital currencies and highlighted the potential risks of unchecked authority over money supply, which could result in inflation and reduce the purchasing power of households.
“We kicked them out of our banking system because the opacity of the system is still a threat to financial system stability.”
Kinsley Obiora, deputy governor of economic policy of the central bank of Nigeria.
Obiora further explained that the creators of cryptocurrency believed that central banks should not have unrestricted authority over currency manipulation, which is what led many to digital currencies in the first place.
These concerns played a significant role in the government’s decision to implement the ban and impose restrictions on crypto-related activities in Nigeria.
A changing stance
Back in February 2021, the CBN imposed a ban on commercial banks, prohibiting them from participating in any cryptocurrency transactions.
The motive behind this decision was to safeguard citizens from illicit activities and fraudulent practices associated with the crypto market, while ensuring that the nation’s financial and banking sectors remained detached from cryptocurrency trading.
Nevertheless, the CBN has recognized the potential of cryptocurrencies to enhance financial inclusion and transparency in Nigeria in the coming years.
Despite this ban, Nigeria has emerged as a global leader in cryptocurrency adoption, with a staggering 45% of its population reportedly using or owning digital currencies in 2022, according to data referenced in Business Insider.
This translates to over 90 million individuals, a figure that surpasses the population of the United Kingdom by nearly 1.5 times, a possibility since cryptocurrencies can be traded on Nigerian crypto exchanges, they just exist separate from the banking sector in the country.
This release comes just one month following the Nigerian government approaching its national blockchain policy to institutionalize related technology across the nation, signifying that further change may be under way.