Nigeria: Crypto regulations are stifling innovation

Nigeria’s central bank has announced that it will be continuing plans to upgrade the Central Bank Digital Currency (CBDC) so that it can operate with more retailers and service providers in the country. At the same time, the country’s bank and financial watchdog are also looking to make the crypto regulations stricter to put pressure on the financial technology industry in the country.

Bariboloka Koyor, the Central Bank of Nigeria (CNB) branch controller, recently spoke about the bank’s aim to encourage companies and users to consider the idea of the country’s CBDC – the eNaira. According to a report, Koyor’s talked about the “sensitisation campaign” recently held at the Kairo market. He said:

“Starting from next week, there is going to be an upgrade on the eNaira speed wallet app that will allow you to do transactions such as paying for DSTV or electric bills or even paying for flight tickets.”

According to Koyor, the upgrade of the CBDC is set to make the digital currency more accessible to the market in general. This means making the process of onboarding new companies which will aid in allowing users greater, easier access to using the CBDC. He also said that the CBDC will become the standard way for businesses to gain financial support from the government in the longer-term future.

“This is a project that the CBN has rolled out to reach every Nigerian in terms of financial inclusion and in terms of efficiency, reliability, and safety of banking transactions so that we can do banking transactions very easily and safely and the people in Nigeria can enjoy the benefit of the eNaira.”

The Naira and Nigeria’s adoption of crypto

Over the past few years, the Naira has dropped significantly in value with the economy suffering desperately from inflation rising and a currency that can’t hold its value. As a result, Nigerians have looked to alternative investments to hedge against the country’s fiat currency. Cryptocurrency and Bitcoin over the past few years has become a popular way for Nigerians to save and avoid locking their funds into a currency that will lose value over time.

However, as the country launched the eNaira in October last year, there have been increasing restrictions on cryptocurrency investment and trading. Earlier in the year, Central Bank of Nigeria put a ban on banks from transacting with crypto trade exchanges. In November, following the launch of the CBDC, this ban was enforced and customers were no longer able to buy, sell, or withdraw on crypto exchanges through banks in the country. Any indication of cryptocurrency trading in the country from customers would be flagged.

Crypto crackdown set to stifle the fintech space in Nigeria

The report was released by the Secretary Generals of the Organisation for Economic Co‑operation and Development (OECD) and the United Nations (UN) in April to address the crypto restrictions from the Nigerian bank. According to the report, slapping strict regulations on the fintech space could have a long-lasting impact on the future of the country’s innovative space. As per the report:

“The restrictions on cryptocurrency transactions in Nigeria have crippled foreign direct investment in the fintech industry and negatively impacted millions of young Nigerians who earn a living from the sector. Many have found a way, however, to lawfully bypass these restrictions and continue business, effectively denying Nigeria the taxes and transaction fees that would otherwise come into the system.”

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