Cryptocurrency: A New Dawn For Nigeria’s Economic Revival?
By: Femi Adebisi Jp.
In a groundbreaking move that has captured the attention of the global financial community, the Central Bank of Nigeria (CBN) recently announced the lifting of the ban on cryptocurrency. This decision marks a significant shift in Nigeria’s economic landscape and has the potential to unleash a wave of economic opportunities that could reshape the nation’s future.
The ban on cryptocurrency, which was implemented during the tenure of ex-President Buhari, has been a subject of intense debate and scrutiny. With a market capitalization of over $1.8 trillion, cryptocurrencies represent a burgeoning sector of the global economy, offering new avenues for investment, innovation, and economic growth. However, the ban had stifled Nigeria’s ability to harness the full potential of this transformative technology, hindering the nation’s economic progress and alienating its vibrant youth population from participating in the digital economy.
The decision to lift the ban, spearheaded by the visionary leadership of CBN Governor Mr. Olayemi Cardoso, marks a turning point for Nigeria. By embracing cryptocurrency, Nigeria has opened its doors to a vast pool of global capital, signaling to investors that the nation is ready to embrace innovation and participate in the digital economy. This move not only positions Nigeria as a progressive player in the global financial arena but also paves the way for the country to leverage cryptocurrency as a catalyst for economic revival.
The economic relevance of cryptocurrency in revamping Nigeria’s economy cannot be overstated. Through effective management and regulation, Nigeria stands to gain in several key areas. Firstly, the embrace of cryptocurrency presents an opportunity to attract foreign direct investment, foster entrepreneurship, and drive job creation in the burgeoning digital economy. With the right policies and infrastructure in place, Nigeria can position itself as a hub for blockchain and cryptocurrency innovation, nurturing a new generation of tech-savvy entrepreneurs who can drive economic growth and prosperity.
Furthermore, the adoption of cryptocurrency can enhance financial inclusion and empower millions of Nigerians who have been excluded from the traditional banking system. Cryptocurrencies and blockchain technology offer the potential to revolutionize financial services, providing secure, low-cost, and accessible alternatives to traditional banking for the unbanked and underbanked populations. By leveraging cryptocurrency, Nigeria can bridge the gap between traditional financial services and the untapped potential of its burgeoning digital economy, fostering greater financial inclusion and economic empowerment for all its citizens.
In addition, the effective management of cryptocurrency can enable Nigeria to capitalize on the opportunities presented by decentralized finance (DeFi), tokenization of assets, and smart contracts, unlocking new avenues for capital formation, investment, and economic development. By embracing these innovations, Nigeria can foster a more dynamic and resilient financial ecosystem, paving the way for sustainable economic growth and prosperity for future generations.
As Nigeria embarks on this new chapter in its economic journey, the government, regulatory authorities, and industry stakeholders must collaborate to develop a robust regulatory framework that balances innovation with consumer protection and financial stability. Nigeria must seize this opportunity to lead the way in shaping a responsible and inclusive cryptocurrency ecosystem that harnesses the full potential of this transformative technology for the benefit of all Nigerians.
The lifting of the ban on cryptocurrency represents a watershed moment for Nigeria, signaling a new era of economic revival and prosperity. By effectively managing and embracing cryptocurrency, Nigeria stands to gain access to new capital, foster innovation, and create unprecedented opportunities for its ambitious youth population. As Nigeria positions itself at the forefront of the digital economy, it has the potential to emerge as a shining example of how embracing innovation and harnessing the power of cryptocurrency can propel a nation towards sustainable economic growth and prosperity.
It is important to note that effective management of cryptocurrency requires a comprehensive approach that encompasses education, consumer protection, cybersecurity, and regulatory oversight. Nigeria must prioritize the development of a skilled workforce and educational programs to equip its citizens with the knowledge and skills needed to thrive in the digital economy. Additionally, robust consumer protection measures and cybersecurity protocols are essential to safeguarding the interests of investors and users of cryptocurrency platforms, fostering trust and confidence in the emerging digital financial ecosystem.
Furthermore, regulatory oversight must strike a delicate balance between fostering innovation and ensuring financial stability. By engaging with industry stakeholders and international best practices, Nigeria can develop a regulatory framework that promotes responsible innovation, transparency, and market integrity, while mitigating risks associated with money laundering, fraud, and illicit activities.
Giving legitimacy to cryptocurrency by the Central Bank of Nigeria (CBN) has the potential to address the USD foreign exchange shortfall and facilitate the inflow of much-needed hard currency to support and revitalize the Nigerian economy. This can be achieved through several mechanisms and opportunities presented by the legitimization of cryptocurrency:
1. Attracting Foreign Direct Investment (FDI): Embracing cryptocurrency can position Nigeria as an attractive destination for foreign investors looking to participate in the burgeoning digital economy. By providing a clear regulatory framework and legal certainty for cryptocurrency-related activities, Nigeria can attract FDI from international cryptocurrency companies and investors, contributing to the inflow of hard currency and stimulating economic growth.
2. Remittances and Cross-Border Payments: Cryptocurrency has the potential to streamline and lower the cost of remittances and cross-border payments. By legitimizing cryptocurrency, Nigeria can leverage blockchain technology to facilitate more efficient and cost-effective remittance flows, reducing the reliance on traditional foreign exchange channels and enhancing the inflow of hard currency into the country.
3. Fostering Innovation and Entrepreneurship: Legitimizing cryptocurrency can foster innovation and entrepreneurship in Nigeria’s digital economy. By providing a clear regulatory framework, the government can encourage the establishment and growth of cryptocurrency-related businesses, creating new sources of hard currency inflows through export-oriented cryptocurrency services and products.
4. Diversification of Foreign Reserves: The legitimization of cryptocurrency can enable the diversification of Nigeria’s foreign reserves. By holding a portion of foreign reserves in cryptocurrencies, the country can potentially benefit from the appreciation of digital assets and hedge against currency risk, contributing to the strengthening of its foreign exchange position.
5. Access to Global Capital Markets: Legitimizing cryptocurrency can provide Nigerian businesses and startups with access to global capital markets through Initial Coin Offerings (ICOs) and Security Token Offerings (STOs). This can facilitate the inflow of hard currency investments into Nigerian ventures, supporting economic development and innovation.
6. Facilitating Trade and Investment: The acceptance of cryptocurrency can facilitate international trade and investment by providing an alternative means of settlement and reducing reliance on traditional banking channels. This can enhance the ease of doing business with international partners and contribute to the inflow of hard currency through trade-related transactions.
Nonetheless, collaboration with international regulatory bodies and adherence to best practices will be crucial in leveraging the potential benefits of cryptocurrency to address the USD foreign exchange shortfall and support Nigeria’s economic recovery.
One notable example of a country that has embraced cryptocurrency and has seen significant contributions to its economy is Malta. Malta has positioned itself as a leading jurisdiction for blockchain and cryptocurrency-related activities by creating a favorable regulatory environment and actively courting cryptocurrency and blockchain businesses.
In 2018, Malta introduced a comprehensive legal framework for blockchain, cryptocurrency, and distributed ledger technology (DLT) ventures, becoming one of the first countries to regulate the sector. The government’s proactive approach has attracted a significant number of blockchain and cryptocurrency companies to establish operations in Malta, contributing to the growth of the country’s digital economy.
The contributions of the cryptocurrency industry to Malta’s economy include job creation, investment inflows, and the establishment of a thriving ecosystem of blockchain and cryptocurrency-related businesses. While specific data on the volume of contributions of the cryptocurrency industry to Malta’s economy may not be readily available, it is known that the country has experienced tangible economic benefits from the influx of blockchain and cryptocurrency-related activities.
It’s important to note that the cryptocurrency industry’s contributions to a country’s economy can include direct and indirect impacts such as tax revenues, job creation, innovation, and the development of ancillary services and industries.
The U.S. is the world’s largest crypto market. On a regional basis, Central & Southern Asia and Oceania account for 20% of the world’s cryptocurrency market, according to Chainalysis.
The combined value of Bitcoin was equivalent to just 0.11% of the world’s money. Bitcoin was worth only about 3.4% of the world’s gold supply. All cryptocurrencies combined accounted for about 0.23% of the world’s money.
Bitcoin has provided another avenue to investors for participating in the global economy through its financial transactions while circumventing the economic policies of the U.S. Some experts have concerns that Bitcoin will pose a threat to U.S. dollars and will impact the global economy in terms of reserve currency if it is not properly regulated.
In 2023, on the eve of its departure, the Buhari-led government, with its history of being averse to crypto, surprisingly introduced a new law to tax gains on digital assets like cryptocurrency. Until cryptocurrency was banned by the same administration, Nigeria was Africa’s top crypto economy
Perhaps even more notable is that Nigeria’s crypto economy continues to grow despite market turmoil. Nigeria is one of only six countries in the top 50 by size globally whose crypto transaction volume grew year-over-year. It is estimated that over 22 million people, 10.3% of Nigeria’s total population, currently own cryptocurrency
The negative thing about remains, Bitcoin is neither issued nor regulated by a central government and, therefore, is not subject to governmental monetary policies, this is where the issue of regulations becomes imperative because Bitcoin’s price is primarily affected by its supply, the market’s demand, availability, competing cryptocurrencies, and investor sentiment, thereby bypassing the CBN protocols.
However, the economic problem that Bitcoin solves is the double-spending problem which is a generic problem for any payment system. As the name suggests, a double-spend is an instance in which a user spends the same unit of currency twice.
Be that as it may, the lifting of the ban on cryptocurrency is a testament to Nigeria’s commitment to embracing the future and seizing the opportunities presented by the digital revolution. As the nation embarks on this transformative journey, all stakeholders must work together to build a sustainable and inclusive cryptocurrency ecosystem that empowers Nigerians to participate in the global digital economy and secures the nation’s position as a leader in the emerging digital financial landscape.
In conclusion, the lifting of the ban on cryptocurrency represents a pivotal moment in Nigeria’s economic history, offering a new pathway toward economic revival, inclusion, and prosperity.
By effectively managing and embracing cryptocurrency, Nigeria has the potential to unleash a wave of innovation, investment, and economic empowerment that will benefit all Nigerians and position the nation as a dynamic player in the global digital economy. Now is the time for Nigeria to embrace the future, seize the opportunities presented by cryptocurrency, and chart a course towards a more prosperous and inclusive economic future for all its citizens.
Hon. Femi Adebisi Jp.
adebisiolufemi72@gmail.com
