With the Central Bank of Nigeria (CBN) Governor Godwin Emefiele assuring that the country will soon have its own digital platform, experts are optimistic that FinTechs would be the biggest beneficiaries of the decision; BENJAMIN UMUTEME reports.
Back in February when the Central Bank of Nigeria announced that Deposit Money Banks (DMBs) should stop facilitating payment for crypto-currencies, many Nigerians were taken aback, most of all FinTechs, as many were engaged in crypto-currency trading.
The apex bank further instructed all banks and other financial institutions to identify individuals or entities that transact in crypto-currency or operate crypto-currency exchanges and close the accounts of such persons or entities. Seen as the largest crypto-currency market in Africa and the second largest worldwide, analysts felt the CBN’s decision was not a wise one.
Over the years, it has become obvious that the relationship between governments and crypto-currencies has always been tense. In some countries, this has led to outright bans on buying, owning, and trading.
The outright prohibition of crypto-currencies mainly happened around 2017 and 2018, coinciding with Bitcoin’s (BTC) Bull Run. As central banks and governments noticed the surge in interest in crypto-currencies, ignoring this growing market was no longer an option.
Countries’ stance on cryptos
While those were the biggest years for bans, some countries continue to consider prohibitions on these coins they can’t control. For instance, only recently, the central bank of Turkey enacted a ban on crypto-currency payments. They consider this a risk to investors who can’t recover any losses. India is yet to make up its mind whether to ban or not to ban.
Also, for Bolivia, Ecuador, it is a no; just as Algeria doesn’t support internet money. In Nepal, it can land one in jail. Qatar prohibits banks from dealing with crypto while in Egypt, crypto is haram. For South Korea, authorities are not interested in ‘privacy coins.’ Bangladesh doesn’t support crypto. It asked citizens “to refrain from performing, assisting, and advertising all kinds of transactions through virtual currencies like Bitcoin to avoid financial and legal damage.”
As far as Uche Uwaleke, a professor of Capital Market, the CBN’s directives to banks is borne out of the next to be able to effectively regulate the crypto market.
“First, it contends that crypto-currencies are illegal in Nigeria because their use goes against the key mandate of the CBN, enshrined in the CBN Act as the issuer of legal tender in Nigeria.
“The apex bank is equally worried that crypto-currencies are issued by unregulated and unlicensed entities. In response to the public reaction which trailed its recent directive to banks, the apex bank came close to calling cryptos fake assets when it asserted that unlike Fiat money which is backed by the full faith of a country or Central Bank, crypto-currencies do not have any intrinsic or fundamental value. Furthermore, the CBN is concerned that they are being used for money laundering, terrorism financing and other criminal activities given the anonymity associated with virtual currencies. So, the recent measure taken by the Bank in this regard is meant to protect the integrity of the country’s financial system.”
CBN’s promise
Bans come and go, but cryptos stay. As mainstream acceptance of cryptos continues to grow, many countries are beginning to look at various ways to incorporate their use into its payment system.
Nigeria’s apex bank, driven by dynamic and innovative leadership has come to realise that digital money is the future.
That is why during his press briefing after the end of the 279th MPR meeting in Abuja last week, the CBN Governor, Godwin Emefiele, assured Nigerians that digital currencies will have a place in the country.
He said, “We have carried out our investigation and we found out that a substantial percentage of our people are getting involved in crypto-currency which is not the best. Don’t get me wrong, some may be legitimate but most are illegitimate.”
Under crypto-currency and Bitcoin, Nigeria comes 2nd while in the global side of the economy, Nigeria comes 27th. We are still conducting our investigation and we will make our data available.”
Emefiele voiced his concerns surrounding digital assets using the CEO of Tesla, Elon Musk’s uncertainty as an example.
“We saw the market collapse. Initially, Elon Musk tweeted around the time when we said our banking and payment facilities are no longer available for crypto-currency transactions and he tweeted that he will invest $1.5 billion and the price (Bitcoin) went up. He now tweeted and raised a few concerns and the thing (Crypto-currency) plunged.”
After stating his concerns, the CBN governor went on to say, “We are committed to the CBN and I can assure everybody that digital currency will come to life even in Nigeria.”
Experts’ views
For experts and crypto-traders, Emefiele’s assurance on the bank’s readiness to unveil a digital platform for the country is the best news they have heard yet in 2021.
The Head of Economics Department, Pan-Atlantic University, Lagos, Dr. Olalekan Aworinde, stated, “When you have a digital currency in place, the implication is we would use less of the naira, particularly because of improved financial transactions. If people do not demand the naira, its value is likely to reduce.
“Also, if we adopt a digital currency, it will affect the total money in circulation. A narrow money supply occurs. When the demand for the naira is more than its supply, the value of the naira would rise. But inflation is not our friend, it is on the increase all the time. So, we cannot easily gauge if the value of the naira would improve because of this.”
He added that if the CBN were to float a digital currency, it would be a step in the right direction.
Aworinde said, “When ATMs were first introduced, it was met with great skepticism. But now, nearly every household has an ATM card. People do not carry as much cash as they used to before. It also created jobs for some people. Although for this to be seamless, the government will have to increase its investment in cyber-security.”
Also, a financial planning expert, Mr. Kalu Aja, said unveiling a digital currency could allow for bigger remittances into the country.
“A central bank’s digital coin is a stable coin, which means it is backed by dollar reserves. If the CBN allows Nigerians offshore to remit using a CBN stable coin, it will create a vibrant secondary market for digital naira. Yes, Nigeria is ready. The Nigerian bank payment system is amongst the best in the world,” he noted.
For the chief executive officer of KoinWa, Hakeem Disu, the plan by the Central Bank to float its own digital currency “is a welcome development.”
KoinWa, is a cryptocurrency platform operating in Nigeria.
According to the CEO, the move would strengthen the naira and revolutionise the country’s financial industry.
He said, “Digital currency is basically about strength in numbers. Nigeria just needs to position itself in the crypto-currency space ahead of other countries, considering the fact that the nation is the second-largest bitcoin hub in the world, according to data from last year.
“And another thing is CBN needs to work with the people already in the space, especially the ones in exchanges as they are well-grounded in block chain technology. It is an extraordinary move that might help banking cut down on operational costs.”
However, Economist Friday Efih is skeptical about the Apex Bank boss statement. He told Blueprint that with the way digital currency was gaining ground globally, it was only a matter of time before the CBN joined the train.
According to him, it has also given hope to FinTechs that have lost a substantial sum of money due to its action earlier this year.
“So many FinTechs whose business has almost gone under would come alive again. And with it, people would be employed. The multiplier effect on the economy will be enormous.”
