Nigerian young resident population now feels more mistrust and bewilderment, because of the FG’s recent attack against Nigeria’s crypto industry
A crackdown on peer-to-peer (P2P) cryptocurrency transactions is anticipated, with Nigeria’s National Security Adviser (NSA) planning to classify crypto trading as a national security threat.
This marks a significant shift in regulatory policy, particularly considering the previous, more relaxed approach of the Bola Tinubu administration towards cryptocurrencies. The Central Bank of Nigeria reversed a two-year prohibition on cryptocurrency transactions in December 2023, signaling a more favorable regulatory environment.
In his campaign manifesto, Nigerian President Tinubu had previously pledged to legalize crypto and blockchain technology for use in the country’s banking and finance sector.
According to Google Trends, Nigeria ranks second globally in terms of interest in Bitcoin. A report from Chainalysis indicates that Nigeria boasts one of the highest cryptocurrency usage rates in Africa, with a 9 percent annual growth rate. Among the six countries experiencing consistent growth since 2021, Nigeria ranks third in this regard.
These trends underscore that Nigerians are among the world’s most significant cryptocurrency users and harbor a strong affinity for digital assets.
This is based on the important fact that Nigerians are adopting cryptocurrency to transfer money instead of the costly and cumbersome current procedures.
Remittances are essential to many Nigerians’ everyday lives; therefore, any method to make the procedure more efficient and affordable would be greatly appreciated by them. This is where the cryptocurrency sector enters the picture.
World Bank data for last year showed that remittances to Nigeria, accounting for 38% of remittance flows to the Sub Sahara region, grew by about 2%, while two other major recipients, Ghana and Kenya, posted estimated gains of 5.6% and 3.8% but lagged behind Egypt in volume.
Nigeria is a powerful player in the crypto space, partly because of its young population—more than 45% of its citizens, according to CIA Factbook data, are under the age of 54—as well as the nation’s quickly rising smartphone and internet usage.
Chainalysis data highlighted that between July 2022 and June 2023, the volume of cryptocurrency transactions in Nigeria increased by 9% year over year to $56.7 billion. With 43% of its current population under 15, Nigeria has one of the youngest demographics in the world, and with a population of 223 million, it is also one of the fastest-growing in Africa, according to a UN study.
Nigeria’s usage of crypto remains high
The rising use of smartphones and a younger, tech-savvy populace are creating new opportunities for cryptocurrency-related businesses. A KuCoin survey indicates that 35 percent of Nigerians between the ages of 18 and 60 trade or invest in cryptocurrencies, such as Bitcoin.
Many Nigerians find some sense of price stability in stablecoins because they are primarily based on the US dollar and protect holders from abrupt fluctuations in the value of the naira. Tether is now the stablecoin that is traded the most in Nigeria.
Though there is a significant number of dark actors in the country’s crypto space, data shows a negligible number of transactions are for illicit purposes. TRM data revealed the share of illicit funds as a proportion of all crypto value globally fell from 0.63% in 2023 to 0.70% in 2022.
Experts predict that the new crackdown on cryptocurrencies will worsen matters for millions of people who already use peer-to-peer networks to trade digital assets.
The highest interest for USDT a popular stablecoin on the yearly spectrum, is the Southeast part of Nigeria. These states are known for commerce and trade though Jigawa state was an exception.
Fintechs clampdown
Nigeria now has a high rate of youth unemployment, with over one in three young people unemployed. It ranks third globally in terms of official unemployment rates. Amidst the nation’s ongoing efforts to regulate Nigerian crypto market, some local fintech service providers have issued warnings to customers not to use their accounts for cryptocurrency transactions or risk facing severe consequences.
Customers of Opay, Moniepoint, PalmPay, and Paga have been informed that facilitating cryptocurrency transactions with them will result in the blocking of their accounts. This comes after Moniepoint and other recently established banks were instructed by the Central Bank of Nigeria (CBN) to cease accepting new clients.
The SEC’s most recent action suggests that the federal government is trying harder to regulate the cryptocurrency industry considering growing worries about illegal activity and naira exchange rate manipulation.
A restriction of this kind would also probably make matters worse because it might force local cryptocurrency exchanges to relocate or close, endangering thousands of well-paying jobs in Nigeria, a country with a high unemployment rate.
Final plea
President Tinubu has the opportunity to solidify his place in history by advocating for Nigeria’s knowledge-based economy through regulatory measures similar to those in places such as the UAE, France, and Japan. This could attract the necessary investment to stimulate growth, as seen in the fintech industry.
The FG’s recent crackdown not only sends the wrong message to foreign investors who are essential to finance Africa’s leading frontier but also jeopardizes Nigeria’s economic competitive advantage in the rapidly expanding crypto industry.
The high adoption of cryptocurrency in Nigeria underscores the need for clear regulatory reforms that balance safeguarding the interests of all stakeholders, maintaining financial stability, and promoting innovation. There is still a ton of room for growth and so many untapped opportunities
Further efforts are needed for Nigeria to decisively move toward digital asset regulation. The regulatory framework still requires careful review, considering the risks associated with cryptocurrencies and related malpractices. It is far from straightforward. Most agree that the SEC’s recent actions suggest that Nigerian authorities are less receptive to the concept of crypto assets than they have often indicated.