Nigeria's central bank makes a "reversal" on its cryptocurrency ban

The Governor of the Central Bank of Nigeria (CBN), Godwin Emefield, has said he will “allow” trading in Bitcoin and other cryptocurrencies, according to local news reports.

In February this year, the Central Bank of Nigeria issued a letter ordering the country's banks and financial institutions to close the bank accounts of individuals or entities related to cryptocurrencies, with immediate effect. The letter was signed by Bello Hassan, director of banking supervision. In addition, the central bank also made it clear that if banks do not implement this regulation, they will be subject to severe regulatory sanctions.

Aside from the cryptocurrency market peaking at $2.5 trillion in total market capitalization, not much has changed in the cryptocurrency space between then and now, at least not fundamentally. This begs the question, why did the Nigerian central bank abandon its earlier regulatory plans?

A U-turn on Cryptocurrency Stance

Nigeria has a less than favorable relationship with Bitcoin, and despite having no legislation criminalizing cryptocurrency trading, authorities in the West African country have resorted to restricting/banning cryptocurrency trading in an effort to establish their own rules on the matter. Since the central bank banned financial institutions from using cryptocurrencies 85 days ago, Nigeria’s Bitcoin peer-to-peer (P2P) trading volume has risen 27%.

The Central Bank of Nigeria said in February that this was necessary to protect citizens from the risks of cryptocurrency trading. In addition, as an unregulated market, there is no legal remedy if something goes wrong. Governor Godwin Emefield also linked illegal activities, including money laundering and terrorist financing, to Bitcoin.

However, this has all clearly changed now, with Godwin Emefield now saying that “digital currencies will be accepted” in Nigeria. He said: “We will be committed to the CBN, and I can assure everyone that digital currencies will become a reality in Nigeria.”

Still, he remained confrontational about cryptocurrencies, insisting his investigations showed that most crypto transactions were for illegal purposes: “We did our investigations and found that a large portion of our population is involved in cryptocurrencies, but it’s not all good. Don’t get me wrong, some of it may be legal, but most of it is not.”

Nigeria Ignores Bitcoin ‘Ban’

Nigerians pay little attention to the edicts of the Central Bank of Nigeria as its purchasing power continues to decline due to a variety of factors, chief among them the instability of Nigeria’s legal tender, the naira.

Before the Nigerian Central Bank ban came into effect in February, Nigeria had the highest rate of cryptocurrency use among all the countries surveyed. 32% of respondents said they owned or used cryptocurrency. In comparison, the United States ranked eighth with 6%. Nigeria's active Bitcoin trading activities have earned the country the title of "Africa's Bitcoin Country."

In response to this on-and-off regulation, Nigeria’s cryptocurrency economy appears to have adapted, with peer-to-peer (P2P) exchanges seeing a sharp rise in popularity. Another way to circumvent the Central Bank of Nigeria’s ban is through over-the-counter (OTC) trading, which has also flourished in the country since February.

As Bitcoin proponent Anthony Pompliano, co-founder and partner at Morgan Creek Digital Assets, put it, “You can’t kill the network.” This seems to be something Nigerian authorities have recently realized as well.

New things will continue to break out of the circle at various stages and gain acceptance from a wider range of people. As new things enter the cognition of more people, they will actively expand their cognition and be one step ahead of others.

Finally, I want to say that what you lack is not a Bitcoin, but the ability to obtain this new thing.

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