In a circular released in February 2021, the Central Bank of Nigeria barred Nigerian banks and other financial institutions from trading in and allowing cryptocurrency transactions. The restriction came on the heels of the 2020 EndSARS protest, which had been largely sustained by Bitcoin donations after the CBN suspended the bank accounts of individuals and organizations suspected of sponsoring the demonstrations. Though the news came as a bombshell to Nigeria’s crypto community, it was particularly disturbing for 23-year-old Gabriel, who had only just ventured into the market
“The ban felt like witchcraft,” Gabriel told Prime Progress. “Because crypto was becoming a beacon of hope for many young, unemployed graduates.”
Among the concerns cited by the apex bank then were terrorism financing and money laundering. To that effect, bank accounts suspected of trading in cryptocurrencies were closed. Gabriel’s account was closed too shortly afterwards.
“Someone had sent me money using crypto in the narration, and months later my account was closed down,’ he said.
In the wake of the ban, the CBN launched the eNaira “to facilitate diaspora remittances and offer financial inclusion to Nigeria’s unbanked population.” The eNaira prides itself on being the first government-owned digital currency in Africa, but it has not fared any better in use since its launch.
Meanwhile, the clampdown on cryptocurrency trading did little to stymie Nigeria’s interest in cryptocurrency. Working around the restrictions, Nigerians resorted to peer-to-peer networks, which allowed users to trade with each other. A 2023 research by Coingecko revealed that Nigeria heads the list of the top 15 African countries interested in crypto. And it isn’t hard to see why the country’s interest in crypto has soared amidst the clampdown. Inflation and unemployment have worsened, stoking Nigerians’ interest in digital currencies. For example, the value of Bitcoin, the most popular cryptocurrency, is up by 158% in 2023. With a 40 percent devaluation in 2023, the naira, in contrast, joined Angola’s Kwanza as the worst-performing currency in Africa, according to the World Bank.
This steep fall in the naira drove more conservative investors into investing in stable coins, a class of cryptocurrencies whose value is pegged to the dollar. Investing in USDT, a stable coin, provides exposure to the dollar; as such, the value of USDT rises or falls with the dollar.
“Of course this is much better than leaving the money in the bank, where they keep charging you for stamp duties and all those endless charges,” Gabriel said.
Nearly 3 years after it prohibited banks from facilitating cryptocurrency trading, the apex bank is now shifting its stance, citing global regulation on virtual currencies. In a recent circular released on Friday, the apex bank stipulated guidelines for banks and financial institutions to allow for the resumption of operations among virtual asset service providers, or VASPs.
Since the release of this circular, the price of USDT has fallen by a decent margin. It isn’t yet sure whether or not the dip in price is related to the news. While the memo charges all banks to lift the restrictions on cryptocurrency trading with immediate effect, purchasing cryptocurrency assets using bank credit cards is not yet possible. For investors like Gabriel, the CBN’s reversal of its prohibition hardly makes for interesting news. “We don’t care anymore about what they do. People have found a safe haven in P2P.”