Nigeria – the second largest Bitcoin market in the world – has banned the trading of cryptocurrencies. Why did they decide to do this? And what does this mean for the future of those who see cryptos as a safe haven in a weakened economy?
In February 2021, the CBN took the initiative to trigger commercial banks and other financial institutions to close accounts involved in transactions that use cryptocurrency exchanges.
Many Nigerian business owners have said that the crypto ban has taken a significant toll on their businesses, where they are unable to receive or send payments online. Since July 2020, Nigerian banks have significantly reduced the amount customers can spend abroad using debit cards, limiting customers to withdraw around $100.
As oil prices declined and the Forex crisis escalated in 2020, Nigeria entered a recession, the naira devalued, and inflation began to rise. The high cost of moving money encouraged many Nigerian businesses to take the leap of faith into the bitcoin market, increasing the number of Nigerian users by 40% in 2020/21. It has been suggested that the reason behind the crypto ban is the fear of another potential economic crisis due to the digital currency trade. If owners of the assets embedded in cryptocurrencies reside in a different country and take their money, the economy of Nigeria faces potential systemic collapse.
Mr. Godwin Emefiele, The Governor of CBN, has said that the Bank’s decision to prohibit deposit money banks, non-banking institutions and Other Financial Institutions from facilitating trading and dealings in cryptocurrency is in the best interest of Nigerian depositors and the country’s system. He believes that cryptocurrencies become the breeding ground for illegal activity (money laundering, terrorism financing, purchase of small arms, and light weapons and tax evasion), displaying anonymity, obscurity and unregulated entities.
Nigeria is known for committing to building and developing its digital economy, so counteracting this has fuelled great distrust in the Nigerian government. Some believe this is bureaucratic restraint of the livelihoods of many Nigerians, who face the threat of unemployment. Others reinstate their anger of a government they feel is corrupt and unresponsive.
Owners of closed accounts are now withdrawing their funds, aiming to find a place to diversify their savings to reduce their exposure to a single market. So, where are my clients deciding to put their money?
The United Kingdom offers some of the best protection and investment perks as one of the best financial service sectors in the world. With a safe, stable economy, diversifying your funds into the UK allows you to protect your savings from any instability. The most important thing to do in any times of economic trouble is to protect your wealth – and the UK is how my clients do it.
– Katherine Baliad, Senior UK Immigration Specialist