A few days ago, the Central Bank of Nigeria (CBN) under the leadership of Godwin Emefiele announced the prohibition of cryptocurrency.
The move has triggered huge reactions on social media. For many, such a move is an attempt to further strangulate the sub-sector dominated by the youths; who are battling with unemployment and underemployment.
Indeed, the institution of a Central Bank is based on the law of rationality and trust; that the bank will maximize utility, the greatest good for the greatest number. We trust them to be rational; to do what is best for the banknotes in our banks, pockets and promissory notes we hold. In fact, the Central Bank Governor is perhaps the most powerful government official in Nigeria. His words alone hold so much powers.
The emergence of cryptocurrency has helped many to escape being part of the 90 million plus Nigerians living in abject poverty. Many have found a leeway, trading in the currency of the future; a globalised currently that is not limited by borders.
Of course, absolute freedom gives any monetary regulator untold headache. Emefiele probably sleeps and wakes up with the thought of how to keep the Naira up and foreign reserves strong.
Considering that fact that Nigerians traded over $141million in cryptocurrency in 2020; as well as the fact that the country ranked second in volume of cryptocurrency worldwide; Nigerians should get more explanation from the CBN than a circular filled with typographical errors.
Yes, the CBN has absolute powers over monetary policy. Also, analysts have argued that demand for dollars to buy bitcoins is putting pressure on the Naira.
However, how well do we trust the CBN? This same cryptocurrency market is providing jobs for millions of Nigerians. Several local startups also depend on this currency. Therefore, the CBN needs to put out a strong argument on the new policy to ban trading in cryptocurrency.
More facts are emerging on some of the reasons why CBN is clamping down on cryptocurrency. In a report by ThisDay newspaper, it was revealed that the FBI informed the FGN of the use of cryptocurrency by fraudsters to launder money. Well, this is an open secret. We all know that fraudsters “yahoo boys” are using the currency.
But recently, many other Nigerians carrying out legitimate businesses have started using virtual currency as an alternative investment. Certainly, this policy will have an impact on them. Are we sure a cproper cost-benefit analysis was done before the ban? Cryptocurrency is here to stay. Why not put in place proper regulation? Just because China, Russia and other countries have banned the currency does not mean Nigeria should follow the same path.
It is understandable if the CBN is sceptical about the currency. Of course, the apprehension is valid. Even the President of the European Central Bank, Christine Lagarde recently raised concerns on the use of cryptocurrency by criminals. In an interview at a Reuters online event last week Wednesday, Lagarde expressed huge reservation on the rise of bitcoin.
“It’s a highly speculative asset that has led to some reprehensible activity, including money laundering, and any loopholes need to be closed. There has to be regulation. This has to be applied and agreed upon at a global level because if there is an escape that escapes will be used,’’ she said.
How do we avoid punishing some people for the crime of others? How do we protect the interest of legal users of virtual coins without undermining the Naira? These and many more questions need answers.
Beyond the circular, the CBN needs to educate Nigerians on the pros and cons of the policy. The Also, the National Assembly should, as a matter of urgency, commence work on a legislative framework to regulate the sector. We need to be proactive, not reactive at this moment.
On whether Emefiele knowing what he is doing, the jury is still out on that.