Nigeria Bans Cryptocurrencies: What’s the Way Forward?

The Central Bank of Nigeria (CBN) announced its ban on cryptocurrencies on the 5th of February, in a circular which it has now deleted. The country’s apex bank has prohibited Deposit Money Banks (DMBs), Non-Bank Financial Institutions (NBFIs), and Other Financial Institutions (OFIs) from accepting or facilitating payments for crypto exchanges.

The CBN has threatened to take serious regulatory actions on financial institutions that refuse to comply. While several countries of the world are moving towards cryptocurrencies, Africa’s largest economy has decided to go in the opposite direction. 

Why the Ban on Cryptocurrencies in Nigeria?

The CBN has not been explicit on why it has prohibited cryptocurrency transactions in the country. We can only speculate. One of the key promises of the administration was to up the value of the local currency – naira. But so far, the naira has only fallen further with the exchange rate at N480 to $1 in late 2020. In a move to cushion the fall the CBN has placed several restrictions on foreign transactions, causing a lot of Nigerians to turn to cryptocurrencies. And this new outcome of events spurred the CBN turned its guns on the digital currency. 

There’s also the issue of the ENDSARS protest which happen in October last year, where young people used cryptocurrencies to evade the restrictions that the CBN had placed on their bank accounts.

What’s Next for Cryptocurrency Transactions in Nigeria

It is worthy of note that the decision by the CBN is not an actual ban on cryptocurrencies, realistically speaking, that is not possible. That country’s apex bank does not have the power to ban cryptocurrencies or any other fiat currency for that matter. What it has done is ensure that financial institutions in the country no longer support cryptocurrencies.

As it is, Nigerians who own cryptocurrencies do not need to worry about losing them, as it is still secured and rightfully theirs. However, with the CBN ban, converting fiat currency to cryptocurrency will be a huge challenge if not an impossibility. Here’s a way Nigerians can continue to trade cryptocurrencies. 

Peer to Peer Cryptocurrency Platforms

This decentralised approach to trading cryptocurrencies will make it possible for Nigerians to sell and buy the digital currency between each other without having to go through financial institutions – this, however, depends on how well they’re able to mask what they are paying for. The downside here is P2P crypto platforms are prone to fraud.

If things go this way, we can expect a good number of crypto startups in the country to come up with brilliant solutions that will reduce the risks associated with peer-to-peer cryptocurrency trading. 

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