Recent studies have shown that Nigeria has taken the first seat in its interest in crypto currencies and is not in a hurry to slow down despite warnings from the Central Bank of Nigeria (CBN), the highest financial regulatory body in the country. The research was conducted by Malta-based online Cryptocurrency Research Company, Binance Research, from 2011 to 2019 to estimate nation’s interest in the virtual currency system by studying Google Search Ranking of “Bitcoin” by Country/Region and by countries, we mean the citizens of that country, not necessarily its government. What this study showed was that over the years, heat trends have shifted from the West, to the East and Most Recently Africa, where currently, Nigeria is at the top of pyramid. Now, while one cannot implicitly say this trend represents the entire population of Nigerians, what it does prove is that despite CBN’s warning, interest in cryptocurency has not abated one bit and that the central financial power house might not winning this fight, this time.
Inspired by inefficiencies within the traditional financial and banking system, such as needing metals to make coins and to print paper currencies and the problem of trust required to create business transactions, cryptocurrencies has been hailed as the better alternative to traditional financial and banking solutions. Since its inception in 2009, cryptocurrencies have come a long way both in holding the awe of the modern world and in its adoption for use in several transactions all over the world. However, despite mainstream recognition, there remain skeptics, both in governments and mainstream financial institutions, who remain critical of the utility of these digital assets and Nigeria, one of Africa’s most powerful and fastest-growing economies, presents one such curious case. While citizens of the African country have been very vocal in their support for cryptos, the government has not caught on yet. This chasm in opinion was illustrated by the December 2019 edition of ‘The Nigerian Banker,’ released by the Chartered Institute of Bankers of Nigeria, (CIBN).
The report explicitly clarified the Central Bank of Nigeria’s [CBN] position on Bitcoin and cryptocurrencies, stating,
“The CBN has declared that digital currencies are not legal tender with naira as the sole legal tender.”
The CIBN’s report also framed the concerns of Nigerian lawmakers and bank officials, claiming,
“There are concerns on the use of other digital currency which is currently changing the global payment ecosystem.”
This disagreement over cryptocurency between the citizens and the government, provides an interesting case of who determines what works or doesn’t work in the digital, financial sphere. As the highest financial authority at hand, with possibly, the global experience, wide scope knowledge and resources to predict and know, its position on the virtual currency has been consistently reflective of the stand of the Nigerian government and its legislature. In fact, from as far back as 2008, the country’s Senate had ordered the investigation of Bitcoin trading to assess its viability as a form of investment and even the Nigerian Securities and Exchange Commission, chimed in, warning Nigerians against investing in Bitcoin and other cryptocurrencies by citing their inherent risk, volatility and the likelihood of investments being made in fraudulent pyramid schemes, money laundering, yet the startling fact still remains that Nigerians have chosen to go ahead with cryptocurrencies, and one wonders why.
What’s with Nigerians deciding to go ahead with crypto currencies, despite warnings, even going as far as being highlighted in the CIBN 2018 report as making up 41% of Bitcoin users in the world along with Ghana and South Africa? According to Luno’s recent Future of Money report, almost 40% of all Nigerians between the ages of 18 and 35 have lost confidence in the current financial system and 60% of this same population do not believe that the value of the Nigerian Naira will increase substantially over the next 12 months, citing its volatility in recent times. This figure concurs with those also recorded in countries with hyper-inflation such as Venezuela and countries where Bitcoin and cryptocurrencies are actively being used as a hedge against volatile fiat currencies.
The report also found that more than most nationalities, Nigerians are very conscious of the high fees paid during card transactions and mobile banking. With the rising trend of digital payments in the country, cryptocurrencies, are cheaper to use, especially with respect to cross-border transfers.
However, the rise of crypto among Nigerian citizens also makes it a fertile ground for the launch of cryptocurrencies that are not Bitcoin, digital currencies that, in fact, want to take up some of the space occupied by Bitcoin for example, China’s Crypto-yuan. In this case, Nigeria could become a beta-testing field site for the Cypto-yuan, before its full launch on the mainland. China today, with a combination of its military and economic might, is in a great position to make this happen. After all, the Chinese government already owns about 14% of all of Africa’s sovereign debt. Then, there is China’s great diplomatic gamble: The Belt and Road initiative, to which Nigeria is indebted. By funding infrastructure projects in countries across Asia and Africa, China is flexing its soft power muscles, something many argue represents China’s debt-trap diplomacy.
So, the question comes up again, who is a better position to tell what works and doesn’t work in the country; the government or its citizens? Nigerians have found a better trading option with cryptocurrency and with its inherent ability to not be traced or governed, it provides a dilemma to the government, to continue a fruitless war or join in the party by creating their own digital currencies. This idea was proposed by Beatrice Weder di Mauro, President of the Centre of Economic Policy Research, for Europe. Addressing the idea, Tendai Tomu said,
“Central bank digital currencies would be a game-changer if that were to happen.”
Such a compelling idea, but it is nearly impossible, with the kind of aversion government in Nigeria have shown towards the crypto trends. This leaves Nigerians on their own and maybe this will work, after all, is the advantage and lure of virtual currencies, not in its promise of being cheap, trustworthy, lack of regulation and monitoring in the first place?