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Can Cryptocurrency Survive Nigeria?

By Victor Ekwealor

28 February 2021   |   6:15 am

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"Cryptocurrency is generally regarded as an electronic or digital currency that is issued by largely unknown, unregulated elements, using computer codes that are basically meant to encrypt or hide information about both the transactions and the operators and in a sense, it is money that is created out of thin air. "Put another way, distinguished…

The Law versus Bitcoin. Photo: Blockchain News

“Cryptocurrency is generally regarded as an electronic or digital currency that is issued by largely unknown, unregulated elements, using computer codes that are basically meant to encrypt or hide information about both the transactions and the operators and in a sense, it is money that is created out of thin air.

“Put another way, distinguished ladies and gentlemen, cryptocurrency is used to describe the activities of players in an electronic dark world, where transactions are extremely opaque, there are BLACK, they are not white, they are not visible and they are not transparent.

“In another parlance, these are people who deal with transactions that not only do not want a trail but indeed by its nature cannot be trailed.

“I’m sure that these definitions alone are scary enough to create anxiety for any regulator or central bank or FED in any part of the world, and that is the reason virtually all regulators in the world do not recognise it.”

The Governor of the Central Bank of Nigeria, Godwin Emefiele, said this while briefing a joint Senate Committee on Banking, Insurance and Other Financial Institutions; ICT and Cybercrime; and Capital Market.

His statement comes on the heels of the continued uproar that has greeted the ban of cryptocurrency-related activities by Nigeria’s apex bank.

There are one or two anecdotes to Emefiele’s stance.

In March 2020, Crystal, a blockchain investigative tool that provides a comprehensive view of the public blockchain ecosystem, revealed that $384 million worth of bitcoin was transferred across the dark web in the first quarter of 2020.

In July 2020, popular Instagram celebrities, Olalekan Jacob Ponle, known as “Mr Woodberry”, and Ramon Olorunwa Abbas, also known as Ray Hushpuppi, were arrested by the FBI on charges of fraud and money laundering.

According to an affidavit by the Federal Bureau of Investigation (FBI), criminal proceeds from both Woodberry and Hushpuppi were converted into bitcoin, and will most likely be untraceable.

All around the world, the decentralised nature of crypto that has made it a darling of believers, has also made it a headache and nightmare for regulators.

Bitcoin versus the Naira. Photo: WeeTracker

Some of these aficionados claim cryptocurrencies have not found favour with governments because these authorities can’t control them. Regulators, on the other hand, want to put a leash on something they feel has potential for chaos. These differing opinions have understandably caused a riff.

Nigeria has not been left out of these debates.

In the past year, there have been intense ongoing conversations around cryptocurrency and its two trillion dollars market. As these squabbles go on between, the world as we know it, pre-pandemic, is witnessing a shift towards digital currency.

It is even more telling as Nigeria is the biggest market for cryptocurrency in Africa, and the second largest in the world, after the United States. From May 2015 to November 2020, Nigerians have traded 60,215 bitcoins with a fiat value of approximately $566 million.

Cryptocurrency’s popularity in the Nigerian market surged during the #EndSARS protest.

Crowdsourced funding for the protest plunged after financial accounts belonging to the Feminist Coalition (Fem Co.) financial was shut down on the order of the Nigerian authorities.

It was then that the group turned to Bitcoin which provided a safe and efficient donation resource that was out of the reach of the authorities. Besides this, Jack Dorsey, Twitter’s founder and advocate of Bitcoin, encouraged people to donate towards the cause using Bitcoin. A lot of young people dove deeper into crypto after this period. This interest stretched from trading to speculating, and just long term holding as a form of investment.

{files] Police teargas #EndSARS protesters at the Asokoro end of the Presidential Villa, Abuja, as they marched towards the Villa …yesterday. PHOTO: PHILIP OJISUA

But even before the advent of the #EndSARS protests, young people in Nigeria, and all over Africa, have astronomically adopted cryptocurrencies and attendant technologies.

The advent of technology on the continent has been the biggest driver for this growth. Young Africans have become more tech-savvy and in touch with global technologies.

Economically, the naira has become very much prone to inflations, and a very unstable store of value, especially when benchmarked against other currencies. A lot of upwardly mobile young people have turned to cryptocurrencies as a more efficient store and transfer of wealth. A lot of people have even taken up speculating and trading, and earned legitimate income from it.

According to Bunmi (not real name), a student at the University of Nigeria, money saved in Bitcoin during the pandemic has risen by over 300% and has proven helpful for him.

“Before the pandemic, for everyone who wanted to pay back the money I lent them, I told them to pay back in bitcoin. At that time, the money wasn’t this high so it was easy to just pay me and take the cash. Again, during the pandemic, I put my pocket money [about N50,000] into Bitcoin. When it started rising, it really helped me because I made back my money and had enough to be self-reliant until the ban happened.”

In February 2021, the Central Bank of Nigeria announced a ban on cryptocurrency-related activities and instructed banks to close existing accounts trading crypto.

This caused quite a stir all over the world. And was a major inconvenience for young people across the country.

Ifeoma (not real name), a young woman based in Lagos, says she was shocked and is still recovering from the ban.

“I started out slow, but over time I noticed that crypto-based assets have become a larger part of my investment portfolio. Everything seemed to be going fine, then one morning I woke up and saw the CBN notice. At first, I wasn’t sure what was going on, but there was not enough time to make withdrawals from my various crypto accounts. Now, I’ve been without money for a long time, and even when I do, it’s hard to fund and buy more.”

Ifeoma says it is hard, but not impossible. Regardless of the government ban, young Nigerians have found different ways to still buy and trade crypto. Ifeoma wouldn’t tell me any of them.

A Bitcoin Teller Machine in Lagos, Nigeria Sept. 1, 2020. Photo: Quartz

While Nigeria’s apex bank continues its war against cryptocurrency, the whole world is gravitating strongly towards it.

The European Central Bank and Federal Reserves are working towards digitizing their currencies.

A few days after Nigeria’s ban, Tesla’s Inc. invested $1.5 billion in Bitcoin. Its founder and CEO and world’s richest man, Elon Musk, has always been a vocal Bitcoin advocate.

Tesla announced that it would accept Bitcoin for payment in the “near future” joining Wikipedia, AT & T, Microsoft, PayPal Holdings Inc., MasterCard Inc., Curtain University, Western Australia’s largest university.

Bitcoin again pumped by nearly 15% and the cryptocurrency conversation has become even more mainstream while Nigeria’s ban has become a concern for Nigerians.

Everything needs some form of regulation and oversight, but stakeholders say they fear the Nigerian authorities have ulterior motives and will not do right by crypto.

Humphrey (not real name) says he’s worried for the future.

“There’s nothing wrong with the government seeking to regulate things, but I’m afraid that the CBN and Emefiele will stall the adoption of crypto in Nigeria. Every government around the world is trying to understand and, to some extent, regulate cryptocurrencies, but I don’t know if any of them has come out to outrightly ban crypto activities while trying to figure it out. That move alone is all the bad faith that these regulators have to show. How are we supposed to trust them after that kind of move?

I’m hoping for the best, but honestly, this move will most likely regress the progress of cryptocurrencies in Nigeria by more than a lot of years.”

During a recent virtual meeting organised by the Association of Capital Market Academics of Nigeria (ACMAN) in Abuja on February 21, the Securities and Exchange Commission (SEC) and CBN started talks to collaborate on market research to find ways to effectively regulate cryptocurrencies in Nigeria.

The regulators said it will be inadvisable to ignore a market that is globally valued at almost 2 trillion dollars.

Gbite Oduneye, Chief Executive Officer of the Eagle Global Market (EGM) Lagos, said at the meeting,

“We understand the difficulties in the market but the regulators must organise and look for ways, organise and make people operate the way they want in the market.

“Every new innovation will come with a number of difficulties but we have the innovative minds, great regulators that can enable us to take advantage in this.’’

While the regulators go about their research, young people in Nigeria keep finding workarounds for trading crypto.

And they, like Tunji, do not have a lot of faith in the system. For them, shutting down the system before commencing research is not a move that inspires confidence.

**Njideka Agbo contributed to this article.