Last friday, the Central Bank of Nigeria (CBN) published a letter to Banks and other financial institutions (BOFIs) reminding them that dealing in cryptocurrencies or facilitating payments for cryptocurrency exchanges was prohibited. The letter also asked them to identify and immediately close all bank accounts transacting in or operating cryptocurrency exchanges.
The letter was referring to this circular from 2017 that drew the attention of BOFIs to the dangers of virtual currencies. The circular prescribed a series of actions which BOFIs were to take to ensure that anyone engaging in any form of cryptocurrency transaction in Nigeria was doing so in compliance with the necessary AML requirements. At the time, the position was that CBN wanted the general public to tread with caution pending the issuance of substantive regulation. Nothing in that circular prevented BOFIs from facilitating cryptocurrency transactions. Nothing in that Circular prohibited Nigerians from buying or selling cryptocurrency. Nigerians read the circular, shrugged and moved on.
The market bloomed. In 2020 alone, Nigerians traded more than $400m worth of cryptocurrency on local exchange platforms. The actual number is considered to be upwards of half a billion dollars and sites like Quartz and UsefulTulips rank Nigeria as the second largest Bitcoin market in the world and the largest in Africa. Nigerians engage with cryptocurrency in a number of ways, from day trading, to long term investments, money transfers and even a bubbling sub-sector of expert traders teaching tutorials to newbies. Nigeria has them all. Its vast youth population and vibrant tech scene, coupled with the unstable naira economy worked together to create the perfect setting for cryptocurrency interest to grow.
So when CBN published that letter on Friday and backed it up with this press release on Sunday, the outrage was pretty much expected. While it is true that many people were angry because they thought the ban meant that Nigerians could no longer buy and sell bitcoin, for those of us who were “directly affected”, our anger is much more complex than that.
In working countries, even developing countries, Citizens typically expect their governments to provide basic infrastructure, security, water, jobs, and a stable economy at least. In Nigeria, we are expected to provide these things for ourselves. If you live in a relatively average household in Nigeria, chances are that you have a borehole in your house, or your neighbour has one. You also most likely have a generator, or even two. Growing up, your father probably had to give up a few nights sleep every week because he was on vigilante duty. If you’re fortunate now, you simply pay for estate security and change your tyres every year because bad roads are normal. We create everything for ourselves, even jobs.
For young Nigerians, it is much worse. Open instagram and twitter, today, check your whatsapp stories, everybody is an entrepreneur. Young people sell shoes, clothes, food and even hair online. People that went to school. Nigeria’s unemployment rate has tripled in the past five years. With a labor force of 80.2 million, that means about 21.7 million Nigerians are unemployed, a figure that exceeds the population of 35 of Africa’s 54 countries. Even the ones that are employed and earning in Naira find their purchasing power shrinking every day. But we persist. Nigerian youth are the most innovative, resilient and hard working people you can find anywhere. Throw a stone at us? We catch it, carve a wheel and keep moving. Few hours after the ‘ban’, Providus Bank deactivated the virtual accounts used by crypto supporting Fintechs such as Piggyvest, Buycoins, Risevest, Monnify and others. In a matter of days, most of them had created new bank accounts for all their users and activated P2P options that instantly defeated the ‘Ban’ and ensured that the only losers were CBN who could no longer monitor cryptocurrency transactions.
Nigerians know how to innovate around bad policies, we’ve been doing it for decades. What we don’t know how to do is accept oppression disguised as protection.
During the #ENDSARS protests, the Central bank of Nigeria was instrumental in the Government’s fight against those who dared hold it accountable. The CBN did its best to frustrate the protests by blocking donation links and closing the bank accounts of the young Nigerians who were vocal during the protests. True to form, Nigerian youth switched to Bitcoin donations, raising over six million naira in Bitcoin in a matter of days. Of course none of this is related to the CBN’s aha moment of last friday, that would be embarrassing.
The CBN claims that its position is to protect Nigerians from the volatility of cryptocurrencies and the possibility that they can be used for illicit dealings, two characteristics which can easily be used to describe the Naira. In 2020 alone the CBN was forced to devalue the Naira three times. We have seen the Naira fall from 180/USD to almost 500/USD in less than Five years. A ‘volatility concern’ is not an excuse you are allowed to use when your own currency is falling like rain. Right now, anybody who has any money to save is converting it to dollars or crypto because the CBN insists on maintaining its protectionist policies and exhausting our foreign reserves in a bid to ‘defend’ the Naira. In 2018 alone, they spent $36 billion defending the Naira. As for untraceable illicit dealings, Nigeria has lost trillions of Naira in public funds stolen over the past couple of decades, with only a fraction of stolen funds traced and an even smaller fraction recovered. Should we ban the Naira too?
Among the many inaccurate statements contained in the CBS’s justification, was the repeated claim that Bitcoin was “issued” by largely anonymous entities. This is absolutely untrue. Nobody “issues” Bitcoin, you can mine it in your house if you have enough computing power. How can the CBN not know this? They even went as far as to quote Warren Buffet, a ninety year old retired investor whose place on the list of world’s richest men continues to be pushed down by millenials making their fortune on the internet. Fiat currencies including the Naira and Dollar have been used to finance terrorism against the Nigerian state for years. Contrary to the CBN’s heavy emphasis on the widespread use of cryptocurrencies for illegal activities in Nigeria, this report from Chainalysis revealed that illicit cryptocurrency activity accounted for just 2% of the region’s roughly $16 billion trading volume from July 2019 to June 2020. For contrast, an estimated $88.6 billion leaves the continent as illicit capital flight in fiat currencies, equivalent to 3.7% of Africa’s GDP.
The two fears echoed in CBN’s position -volatility and anonymity- only make sense if you analyse the future of money using the principles of yesterday. Bitcoin exists to build a future where Central Banks don’t hold all the power, a future where power resides where it belongs — with the people. Technology won’t go backwards, and if you can’t beat them, you have to join them, or get left behind.
Since last friday, a few interesting things have happened in the crypto world that made CBN’s position even more awkward. Tesla, Elon Musk’s Company made a purchase of $1.5 Billion in Bitcoin, sending the price to an all time high. As if on cue, Finance heavy weights, MasterCard and BNY Mellon announced the introduction of Cryptocurrency into their systems and services. As more people around the world engage with Cryptocurrency and understand the principles on which it is founded, Cryptos like bitcoin are receiving institutional backing from the companies of the future. The CBN’s justifications are shaky on their own, but when placed in the Nigerian context, they fall down flat. The CBN can’t claim it was acting to protect Nigerians from the dangers of cryptocurrency investments when, only a few months ago, it allowed Governors to borrow Billions in pensions without a tangible plan for repayment. Are there any funds more valuable than the blood and sweat of people who have worked in service to this country for decades? Policies have to match actions, otherwise it’s just talk.
Even before the big brains at Piggyvest and Buycoins came up with solutions around the Ban, the rest of us had figured we could simply send dollars to our friends abroad and ask them to credit our crypto wallets. Easy peasy. Nigerians are not angry because the Government stopped us from buying bitcoin — they can’t. We’re angry because they thought they could. And that was embarrassing.
