More harm than good? Nigerian crypto users in disbelief over CBN ban

The Central Bank of Nigeria has banned banks from servicing crypto exchanges in the country in a move that echoes actions taken by its Indian counterpart back in 2018. Reactions to the news among the political class have been divided among ethnic and geopolitical lines, with the more progressive elements calling for a nuanced approach by the apex bank.

In November 2020, Nigeria’s gross domestic product declined for a second successive quarter, plunging the nation’s economy into another recession — the second in the space of five years. According to the Nigerian Bureau of Statistics, 26 out of the 36 Nigerian states did not receive any foreign investments in 2020.

Even before the onset of the coronavirus pandemic, Nigeria’s economy had been battered under the perceived mismanagement and ineptitude of the current administration. However, the country’s cryptocurrency economy had been flourishing in the same time period.

Nigeria has become a hub for crypto adoption, with Google Trends data showing the country as No. 1 in the world in terms of search interest for Bitcoin (BTC). Starved of access to forex, Nigerians have been turning to cryptocurrencies as the next best thing to preserve their wealth against the rapidly declining naira.

CBN not a fan of Bitcoin

Earlier in February, the CBN issued a circular directing all financial institutions to cease rendering services to crypto exchanges. The notice also mandated banks to shut down the accounts of any individuals or entities found to be engaging in cryptocurrency trading activities.

Defending its position, Nigeria’s central bank resorted to the usual arguments: volatility, money laundering, terrorist financing, Silk Road, and “rat poison,” among others. The CBN even highlighted the actions taken by the likes of Bangladesh, Ecuador, Egypt and Nepal, to mention a few, as justification for its ban. In a statement clarifying its position, the CBN remarked:

“The recent regulatory directive became necessary to…

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