Nigeria’s interest in bitcoin drops due to CBN clampdown

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Nigeria, Africa’s most powerful economy by GDP, is no longer at the top of the list of countries with the highest interest in bitcoin; El Salvador has surpassed Nigeria.

 

Nigeria fell to second position with a score of 61, while the central American country takes charge with a perfect score of 100.

The drop in bitcoin interest is partly due to Nigeria’s central bank’s resolve in curbing bitcoin’s grip on Nigeria via a circular dated November 3rd 2021, issued by J.Y. Mamman, the Bank’s Director of Banking Supervision, instructing banks to close the accounts of designated bank customers and place their funds in suspense accounts.

The current circular reiterated the contents of an older circular from 2017, which warned banks not to deal in cryptocurrency and to ensure their virtual currency exchange customers had effective anti-money laundering and anti-terrorist financing controls that enabled them to comply with KYC and transaction monitoring regulations.

Crypto experts argue that Nigeria is exposing these crypto traders to more risk by pushing them out of the banking system and excluding them from the global market that offers unparalleled returns and relative currency stability.

It’s increasingly becoming difficult for a number of its citizens to trade crypto as P2P sellers and buyers are now extremely difficult to locate. People will try to conduct the transaction informally through other P2P methods. In addition, many of these traders reportedly charge exuberant exchange rates thereby discouraging a number of young Nigerians. Local lenders are also no longer allowed to work with digital asset companies after the Nigerian central bank banned crypto assets in February.

After launching its digital currency, eNaira, on October 25, Nigeria hopes to boost its GDP by up to $29 billion over the next decade. The eNaira is now a priority for the CBN, as the digital currency has attracted about half a million users in a bid to lure people away from cryptocurrencies.

eNaira, the digital currency created by the Central Bank of Nigeria, has had an excellent adoption rate, according to Osita Nwanisobi, the bank’s spokesman. Nwanisobi said that more than 488,000 people have downloaded the consumer wallet – which is required to transact in eNaira – while about 78,000 merchants in 160 countries have enrolled. The CBN spokesman estimates that about N62 million ($150,000) has been traded since the eNaira was introduced.

Nigeria is still Africa’s largest cryptocurrency market. In the period between July 2020 and June 2021, Chainalysis estimates that African countries collectively received around $105.6 billion in cryptocurrency. In terms of volume, Nigeria played a huge role to such an extent.

Nigeria has one of the world’s youngest populations, the largest economy in Africa, and Africa’s most populous country. Nigeria has become the continent’s largest bitcoin trading market by volume, thanks to a thriving tech sector.

A sharp drop in remittances during the cholera pandemic, coupled with COVID-19 restrictions and plummeting crude prices, led to bitcoin’s ascent in popularity but Nigeria’s central bank seems to be changing such a narrative.

P2P transactions in Nigeria dropped by 43% a week ago. Nigerians reported P2P volumes of about $9.4 million per week, followed by Kenyans and South Africans with nearly $2.8 million and $1.8 million, respectively.

Young Nigerians usually prefer to store their capital assets in bitcoins and stablecoins, since the naira, like all fiat currencies, is vulnerable to inflation. It’s easy for Nigerians to adopt bitcoin because it has a large population within the age bracket of the tech-savvy. Nigerian youth’s adoption of bitcoin isn’t solely based on this reason.

Because of this problem, the average Nigerian struggles to receive payment from foreign clients. PayPal, the most well-known American payment service, is unavailable, and other options such as MoneyGram and TransferWise are not only expensive and slow, but are also difficult to use.

A major reason why Nigerians are attracted to Bitcoin is that, unlike traditional payment methods, it has no borders, making it effortless and extremely low in transaction fees.

On the other hand, El Salvador’s growing interest is due in part to its government’s support of bitcoin, which has become legal tender there despite widespread domestic skepticism and international warnings to consumers.

As a result of the move, the government of President Nayib Bukele says many Salvadorans will have access to banking services for the first time and save about $400 million in fees each year on remittances sent home from abroad.

The Central American country also plans to build the world’s first bitcoin city, financed with Bitcoin-backed bonds, according to President Bukele, doubling down on his strategy to harness cryptocurrency to drive investment in the country.

 

CREDIT: NAIRAMETRIC