Nigeria embraces crypto with revised policies – what now?

• Nigeria is set to lift the crypto ban with new guidelines from the Apex Bank.
• The country continues to see a rising crypto adoption rate.

Nigeria has been actively discussed in cryptocurrency, primarily due to its increasing adoption, as indicated by various reports. However, the absence of clear regulations over the years led to a ban on digital asset transactions by the apex bank in the country.

There is potential for this situation to change following a recent circular from Nigeria’s central bank. The circular has also been followed by new guidelines.

Nigeria gets new crypto guidelines

On 22nd December 2023, the Central Bank of Nigeria (CBN) issued a circular to the country’s banks. The circular spoke about the importance of following global trends regarding cryptocurrencies.

Notably, it superseded previous circulars from 2017 and 2021, which had prohibited banks from engaging in crypto-related transactions. Alongside this circular, the CBN released guidelines outlining the regulations for the country’s virtual asset service providers (VASPs).

A significant aspect of the new guidelines pertains to the requirements for opening and operating accounts for VASPs. According to the guidelines, financial institutions must maintain records of these VASPs, including transaction details.

Additionally, users on these platforms are mandated to provide means of identification for transactions. This implies that centralized and decentralized exchanges seeking approval in the country must follow the Know Your Customer (KYC) data requirements.

While lifting the ban through regulatory measures is viewed positively, the stipulation for user identification raises concerns about the loss of anonymity. This could potentially lead to mixed reactions from users in the country.

The infamous crypto ban in Nigeria

In February 2021, the Central Bank of Nigeria (CBN) stepped in to address the absence of cryptocurrency regulation and consumer protection measures. The apex bank’s action was motivated by concerns about money laundering and terrorist financing.

Consequently, it issued a circular that prevented Nigerian banks from directly linking bank accounts to cryptocurrency transactions. Despite this ban, the adoption of cryptos in Nigeria continued, leading to the growth of peer-to-peer (P2P) trading.

How Crypto adoption has grown in Nigeria

Based on the analysis of the 2022 cryptocurrency adoption report by Chainalysis, Nigeria was initially ranked 18th in P2P exchange volume.

However, the 203 reports showed a significant shift, with the country now securing the top position in P2P exchange volume. This showed the substantial growth witnessed in Nigeria

Additionally, the report showed that Nigeria ranked second in retail centralized service. The rankings contributed to an overall index ranking of second place.

Despite market turmoil, the report showed that Nigeria’s crypto economy continued to expand. Notably, the country is among the select six nations within the top 50 globally that experienced year-over-year growth in crypto transaction volume. With a growth rate of 9.0%, Nigeria holds the third position among these six countries, reflecting the positive trajectory of its crypto market.

Also, it is important to note that stablecoins were the most dominant transactions in the country. This was largely due to the need to hedge against inflation as the local currency, the Naira, continued to decline.

Source: Chainalysis

How the crypto market has trended

A recent analysis of the cryptocurrency market cap showed substantial growth in the past few months.

Data sourced from CoinMarketCap showed that starting in late September 2023, there has been a notable rise in the market cap. This surge can be attributed to the rising prices of assets, primarily driven by the performance of Bitcoin.

During the specified period, the market cap was less than $1.10. However, as of this writing, the market cap was over $1.7 trillion. 

Source: CoinMarketCap