The Nigerian government is taking a tough stance on cryptocurrency to save its national currency. In a recent meeting with industry stakeholders, the Nigerian Securities and Exchange Commission (SEC) announced plans to delist the naira from all peer-to-peer (P2P) crypto platforms.
The SEC blames P2P platforms for manipulating the naira and the exchange rate. According to the acting Director-General of SEC, Emomotimi Agama, bad actors within the crypto space are exploiting these platforms to undermine the national currency. Due to their ease of use, P2P platforms are a popular option for everyday Nigerians to buy and sell crypto. However, some people could intentionally use P2P platforms to play a game with the exchange rate. They would buy a lot of dollars on P2P platforms using naira. This creates a sudden demand for dollars, pushing the price up. Then, they might sell those dollars back for more naira, making a profit. If the dollar gets more expensive, inflation inherently sets in.
In the last few days, the naira has experienced several fluctuations against the dollar. This week, the Naira started weakening in both the official and parallel markets. The official exchange rate dropped to ₦1,442 per dollar, signifying an approximately 3% weakening from last week. While the black market exchange rate dropped to ₦1,420 per dollar.
According to the CBN, this is a result of a decline in dollar movement in the markets. The total amount of dollars traded (supplied by buyers and sellers) experienced a significant decline of 57.98%. Black market currency traders also attribute the lack of dollar movement to a shortage of dollars. This shortage is impacting individuals seeking dollars for business ventures, personal travel, and imports. Hence, any sign of manipulation inherently affects the economy.
The SEC claims that delisting could lead to a more stable exchange rate. “That is one of the things that must be done to save this space: the delisting of the naira from the P2P platforms to avoid the level of manipulation that is currently happening,” Agama, the DG of SEC, told the members of the local crypto community.
This isn’t the first time Nigeria has made efforts to control or regulate its crypto market.
Nigeria has a strong crypto market. According to the Global Crypto Adoption Index, the market is currently valued at $57 billion. Between July 2022 and June 2023, Nigeria’s volume of crypto transactions grew by 9% year over year to $56.7 billion. However, this rapid growth has attracted the attention of regulators who are worried about potential financial instability.
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Three years ago, the Central Bank of Nigeria (CBN) banned commercial banks from conducting cryptocurrency transactions. The then-CBN governor, Godwin Emefiele, said that a continuation of opaque activities significantly threatened the safety and soundness of the financial system. However, Emefiele’s successor, Yemi Cardoso, lifted the ban last year. The CBN made plans to regulate providers of these virtual assets rather than shutting them out.
Interestingly, the crypto community is cautiously optimistic about the delisting. The Fintech Association of Nigeria has pledged support to the SEC’s efforts to clean up the space. Platforms under the membership of Stakeholders in the Blockchain Technology Association of Nigeria have stopped naira services in solidarity with the government. Already, the body sought collaboration with the federal government in March for proper regulation after developing a Virtual Assets Service Providers Code of Conduct in 2022. The Blockchain Industry Coordinating Committee of Nigeria (BICCoN) has also called for a working group to tackle the industry’s challenges collaboratively.
Apart from the delisting, the SEC is also actively drafting new regulations for the entire crypto sector. According to Agama, this regulatory framework will foster an innovative digital asset regulatory regime that positions Nigeria as Africa’s digital asset powerhouse.
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