By Ayomide Ogunsakin
We The People vs. They — the Government.
Cryptocurrencies have become one of the most talked-about topics in Nigeria today, and it is only right to observe how our beloved country views and handles cryptocurrency and blockchain technology.
As an emerging lawyer actively involved in Nigeria’s digital asssets space, I have witnessed first hand, the battle that unfolds between the people’s unyielding quest for financial empowerment, and the government’s cautious, borderline response.
In this piece, I present to you my research-driven POV on the matter — TheDeFiLawyer’s perspective, if you will — from a “People vs. the Government” standpoint.
The People’s Position
Nigerians are a people who know how to grab opportunities with both hands — and the crypto market together with blockchain technology, presents a plethora of opportunities.
This explains why despite the overall hostile stance on crypto from the government, the Nigerian people, driven by innovation and economic necessity, have embraced these digital assets as a lifeline in a challenging economic landscape — so much so that in 2022, Nigeria ranked 11th globally in the Global Crypto Adoption Index.
This rise is significant when you bring into context, our country’s economic struggles, including high inflation, currency devaluation, and widespread unemployment.
Thus, it is understandable that we seek and seize alternative stores of value like crypto amidst rampant inflation and currency depreciation that eats away at the value of our assets, diminishing our purchasing power.
In recent years, many Nigerians, especially the youth which makes up over 60% of the total population, have engaged in the trading of cryptos like Bitcoin, Ethereum and other altcoins because they offer exciting possibilities, such as quick money transfers and investment opportunities.
Statistics further show that at least 35% of adults in the country are believed to be actively trading digital assets, with the volume of crypto transactions surpassing $55 billion between July 2022 and June 2023.
Additionally, a significant portion of Nigeria’s population is unbanked. As of 2021, over 40% of Nigerians remained outside the formal banking sector, according to the World Bank.
In the real sense of it, cryptocurrency undeniably offers a viable alternative to traditional banking, enabling cross-border payments, remittances, and transactions without the bureaucratic delays and fees associated with conventional banking.
Tech-savvy youths in Nigeria have also gravitated towards blockchain technology for its promise of decentralization and transparency, getting involved in innovative blockchain solutions like Real World Assets (RWAs), Decentralized Science (DeSci), among several others.
The Government’s Position
Let’s explore this side of the divide from two angles:
1. The Approach to Cryptocurrency
2. The Stance on Blockchain Technology
The Approach to Cryptocurrency
First, it is important to highlight that the government has not outrightly turned its back on all aspects of cryptocurrencies.
On the contrary, it actually took initiative and put Nigeria on the headlines in October 2021, when we became one of the first countries in Africa to launch a digital currency — the eNaira.
Unlike the regular cryptocurrencies, however, the eNaira is a Central Bank Digital Currency (CBDC) that is controlled by the Central Bank of Nigeria (CBN). It’s essentially a digital version of the naira which can be used for making payments and sending money quickly and easily.
While the eNaira presumably had the aim of killing two birds with one stone — adopting the benefits of digital money and giving the government the control it needs to monitor and regulate the system — it is clear that the usage of this eNaira has not, to a large extent, been accepted by the people.
It was merely a move by the government to embrace the crypto industry, but in a way that aligns with its laws and policies.
However, the government has been cautious about fully accepting cryptocurrencies which are not under its control, and the reasons for this are not too farfetched.
— Power and Regulatory Concerns
The strength of any government lies in the extent to which it can control or regulate the affairs of its people — especially financially or economically.
Now, when you bring in cryptocurrency, which is not controlled by any central authority and which, by its very nature, seeks to take financial control and autonomy away from the government and intermediaries like banks, placing it in the palms of the people instead, you can be sure that problems are bound to arise.
This is exactly what we see today. Crypto operates in a manner that makes it harder— if not theoretically impossible — for the government to monitor transactions, track and tax its people’s income, and this unavoidably limits its powers.
However, steps are already being taken to navigate the area of crypto taxation, with the Federal Inland Revenue Service (FIRS) announcing plans to introduce a bill on new tax laws for Nigeria’s $400 million crypto market by September 2024.
Similarly, the Nigeria’s Securities and Exchange Commission (SEC) recently revealed its plans to introduce and grant licences for providers of virtual/digital assets, including cryptocurrencies.
— Fear of Fraud and Money Laundering
With the increased usage of crypto, there have also been many fraudulent scams and rugpulls where people have lost their money to fake investments.
Chainalysis reports show that losses from crypto scams globally in 2021 rose to $7.8 billion in crypto. These billions were dubiously stolen from victims, so it is not irrational for the Nigerian government to seek to protect its citizens from such experiences.
After all, it is a common notion, consecrated by century-old legal principles, that the State is to adult citizens what parents are to their children and this births the function of laws — to guide and govern the actions and behaviours of the people, right?
Before I digress too much or bore you any legalese, let’s move on.
The tendency for cryptocurrencies to be used for money laundering and terrorist financing is another argument furnished against their use and adoption by government authorities.
And this too, has its merits, because reports show that approximately one-quarter of Bitcoin users and one-half of Bitcoin transactions are associated with illicit activity, amounting to around 72 million USD per year.
But there is an important point to make here, and I want you to think about it.
The estimated value of money that is laundered through government-issued currencies across the world every year is not one billion dollars.
It’s not even two, ten or hundred billion dollars.
It ranges between 800 billion and 2 trillion dollars annually. Yes, you read that right. Hundreds of billions of dollars every single year.
This makes it clear that the laundering of government-issued currencies still maintains a massive gap from that of cryptocurrencies by several orders of magnitude.
So while money laundering is bad in all its forms and regardless of the medium used, I think it pertinent to ask the question — should crypto really be the focus or is this worry just a chronic case of misplaced priorities?
— The Depreciation of Naira Argument
The government has also suggested that crypto, and the centralized crypto exchange, Binance in particular, is to blame for the weakness of the naira.
Hence, it accused Binance of manipulating foreign exchange rates through currency speculation and rate-fixing on its P2P trading platform, and demanded almost $10 billion in compensation from the exchange.
The Governor of the CBN, Yemi Cardoso further stated that Binance moved $26 billion worth of untraceable funds in and out of Nigeria.
Following these allegations, strict measures were taken, like instructing telecom operators to block crypto exchanges and arresting Binance executives Najeem Anjarwalla and Tigran Gambaryan, who has remained in custody till now.
These steps initially appeared to be validated when the naira staged a notable recovery, even being named the best-performing currency at a point when it gained a massive 12% against the U.S. dollar, propelling the naira-to-dollar exchange rate from the low of over ₦1,800, to about ₦1,230 per dollar barely a month after these steps were taken.
However, the naira’s resurgence proved short-lived, ending the first half of 2024 as one of the worst-performing currencies, and this is rather unsurprising because it wasn’t the first time that the government made similar moves to address concerns about the naira’s depreciation.
Let’s take a walk down memory lane real quick.
In 2021, a similar situation unfolded when the former CBN Governor, Godwin Emefiele, accused Abokifx, a website that monitors parallel market exchange rates through data sourced from street merchants (Bureau De Change), of fueling the naira’s depreciation and engaging in activities that were “undermining the economy.”
Following threats from Emefiele, Abokifx stopped publishing daily parallel market rates in September 2021, but this did very little to halt the naira’s depreciation on the parallel market, as the exchange rate moved from 550 naira per dollar, to over 900 naira by late 2022.
So you see that neither the increased parallel market activity in 2021, nor the rise in crypto trading and usage over the years have been responsible for the naira depreciation issue; they are mere reflections of the effects of much deeper and more fundamental problems that need solutions.
Thus, blaming crypto or crypto exchanges like Binance for the naira’s woes, just as in the case of parallel market traders, will not solve Nigeria’s underlying problems — such as the fundamental weakness of our economy.
Proactive preparation for technological innovations and the pursuit of a balanced regulatory approach that protects consumers and investors would yield much more positive results, rather than reactive measures like banning banks from facilitating crypto transactions like the CBN did in 2021, or pointing fingers at the booming industry for the naira’s instability.
2. The Stance on Blockchain Technology
The Nigerian government hasn’t been absolutely unyielding in its general approach to the industry, so it is important and only fair to give credit in the areas due.
While the government has its concerns about cryptocurrencies, it sees the technology behind it—blockchain—as something with potential benefits.
Beyond its most popular use case which is the creation of cryptocurrency, Blockchain has the potential to revolutionize a wide range of industries including supply chain management, healthcare, voting systems and even real estate.
Furthermore, with its ability to ensure secure, transparent and immutable record-keeping, blockchain can potentially eliminate fraud, corruption and other inefficiencies in traditional systems.
Thus, it is commendable that although cryptocurrencies have faced regulatory challenges and scrutiny, regulatory agencies in Nigeria seem to be embracing the adoption and deployment of blockchain technology, with a willingness to explore its potential benefits across various sectors of the Nigerian economy.
This position is clear from the existence of two key documents: the National Blockchain Policy for Nigeria (NBPN) curated by the National Information Technology Development Agency (NITDA), and the National Blockchain Adoption Strategy (NBAS), which were both approved and adopted by the Federal Government of Nigeria in 2023.
Isa Pantami, who was the Minister of Communications and Digital Economy at the time, stated thus in the foreword of the document espousing the provisions for the NBPN:
“The growth of the digital economy over the past few years is a good indication that this sector can serve as a catalyst for the rapid development of the economy.
Hence, as we continue to explore innovative ways to drive the development of Nigeria, emerging technologies such as Blockchain provide us with immense opportunities to improve efficiency, security, and transparency across various sectors of the economy.”
This statement captures the government’s interest in maximising the benefits of this technology for Nigeria’s development.
The NBAS on its part, encompasses several key elements, including the establishment of a Nigeria Blockchain Consortium, the enhancement of the regulatory and legal framework governing blockchain, and the implementation of blockchain business incentive programs to support small and medium-sized enterprises (SMEs) and startups.
It also recognises the scepticism of regulators like the CBN, which has slowed down the adoption process and resulted in a high entry barrier into the blockchain space.
To address this challenge, it introduces a blockchain sandbox framework which will be spearheaded by these regulators particularly the CBN, SEC, NITDA, Federal Inland Revenue Service (FIRS) and the Nigeria Deposit Insurance Corporation (NDIC).
However, it is worth noting that while the Strategy is commendable, it is not an Act of the National Assembly or a regulation and as such, it lacks the force of law — it is merely an explanatory document.
This raises concerns about how effectively the initiatives outlined in the Strategy will be enforced; concerns which are particularly significant in Nigeria because laws and government initiatives often lack proper enforcement.
So what does the future hold for cryptocurrency in Nigeria?
While individuals can still engage in crypto trading, it is clear that the government wants to monitor and enact laws to guide activities in the space.
Regardless, the momentum behind crypto and blockchain technology in Nigeria is undeniable — and arguably unstoppable.
The people have shown a clear preference for decentralized solutions, as they offer an alternative to the inefficiencies of the traditional financial system.
This shift is not just about innovation for innovation’s sake — it is about survival and empowerment.
And that is something that the government must, ideally, take into consideration as it makes decisions and develops regulatory frameworks going forward — the welfare and protection of its people’s interests.
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