FEDERAL GOVERNMENT OF NIGERIA LIFTS BAN ON CRYPTO WITH STRINGENT GUIDELINES: a blessing or a curse

Nigeria as a nation is famous for putting an outright ban on trends and policies that ravage developed countries, probably because of the nation's lack of understanding of how such things work or how to control them. This was the case in 2021, when cryptocurrency was banned or restricted by the federal government of Nigeria despite the revolutions it was impacting the world with.

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Nigeria is the giant of Africa, with a population of over 200,000,000 and a struggling economy. It has stringent rules and restrictions to stabilize or improve the economy. Unfortunately, the rate of inflation keeps spiking, fast closing in at about 27.3% in October 2023,concurrently under the new administration of a democratic president, Mr. Ahmed Bola Tinubu. It is no news that Nigerians have groaned massively under the new administration, taking tolls from past administrators as we struggle to survive in the face of rising costs of foods and commodities, mostly attributed to the removal of fuel subsidies and the increasing foreign exchange rate. A high demand in a limited supply has the capacity to spike the cost of a commodity; this is similar in the case of dollars to naira.

The Central Bank of Nigeria (CBN) is the financial regulator of transactions in Nigeria. In a letter dated December 22, 2023, with reference to FPR/DIR/PUB/CIR/002/003, the CBN passed a circular to all banks and financial institutions on guidelines on the operations of bank accounts for virtual asset service providers (VASPs).

SEE CIRCULAR ON LIFTING OF CRYPTO BAN IN NIGERIA

The highlight of this circular is that the CBN wants a designated account opened for each crypto trader. The implication is that our regular bank accounts should not be used for crypto, and the crypto accounts cannot be used for other non-crypto transactions. Also, there is a limit to transactions to be made by the account holder, and the bank must, not later than the 10th of the following month, submit the contents of the account to the supervisory department under the CBN. This comes after stringent know-your-customer (KYC) and anti-money laundering checks.

Perhaps you see why the CBN states it is providing comprehensive regulation for crypto in Nigeria. Is this good or bad news for crypto traders in Nigeria? For a start, I believe this is good news, at least as Nigerians would be free to trade crypto and ameliorate or abolish measures such as P2P. These designated accounts will operate, however, without the holder being able to withdraw cash from them. I hope you sense some technicalities in these guidelines. Holders of crypto accounts may have another round of journeys to make to have the cash from crypto in hand. Will the lifting of the ban remain a blessing or a curse with these restrictions? Rather than conclude now, hopefully the implementation of these guidelines will bring the need for a revisit of the restrictions in the face of supposedly removed restrictions.

Would there be any effect on the dollar rate in Nigeria? I believe so. The demand for dollars is going to reduce since transactions can be made on crypto accounts with virtual assets. Users can easily send and receive dollars in these accounts, and the patronage of black or parallel markets would reduce. Perhaps we have seen a reactionary decline in the dollar rate and should expect more when full implementation begins.

Some questions would remain unanswered, such as the fate of closed accounts by banks that were flagged for crypto, the fate of frozen assets in crypto-flagged accounts during the period of ban, and the high volume of bank accounts owned by individuals in addition to the accounts they have.

Hopefully 2024 in Nigeria would be better for it economically as the government as seen the need to revive through possible means different sectors of the economy.

INFLATION

Thank you for reading. I would love to have your comments and contributions.