Nigeria’s regulatory stance raises questions about crypto access

The Nigerian government’s recent engagement with the crypto industry has left many stakeholders in the broader crypto community uncertain about its stance and intentions. Nathaniel Luz, co-founder and chief marketing officer of Flincap, a local crypto over-the-counter (OTC) exchange, has highlighted the need for clarity amidst mixed signals emanating from recent government actions.

Nigeria’s crypto regulatory stance raises concerns

Reports emerged recently from local crypto users experiencing difficulties accessing the websites of various crypto exchanges like Binance and OctaFX through traditional telecommunication providers. This development, which occurred on the evening of Feb. 21, has sparked speculation of a potential government ban on crypto platforms, adding to the ambiguity surrounding the regulatory environment.

Luz suggests that the Nigerian government’s position on the crypto industry lacks transparency and may indicate a reluctance to foster a positive relationship with participants in the crypto space. The attempt to attribute the current exchange rate of 1,800 naira to $1 to OTC traders trading USDT for naira on the P2P market has drawn criticism from Luz.

He argues that blaming OTC traders for the decline in the naira’s value is misguided, as broader economic challenges are likely responsible for the currency’s depreciation. Examining the factors contributing to the depreciation of the naira, Luz points to issues such as excess naira in circulation, a shortage of dollars, heavy reliance on imports, currency exchange by emigrants, and uncertainty surrounding Eurobond payments.

Challenges facing the crypto industry

He emphasizes that these factors are unrelated to local crypto trading and are significant drivers of the naira’s decline. Despite previous efforts, such as lifting the 2021 crypto ban imposed by the Securities and Exchange Commission (SEC) and the Central Bank of Nigeria (CBN), many crypto startups still struggle to meet the criteria for obtaining licenses to operate in Nigeria’s crypto market.

The licensing requirements include a substantial paid-up capital of $340,343 (500 million naira) and an application fee of $20,420 (30 million naira). Luz suggests that the government’s focus should be on addressing these licensing challenges rather than attributing forex-related issues to the local crypto ecosystem.

Nigeria has emerged as the largest peer-to-peer (P2P) market for crypto trading globally, following the Central Bank of Nigeria’s ban on institutions from buying and selling crypto in 2021. This ban prompted a shift towards P2P trading, contributing to Nigeria’s prominence in the global crypto market. The Nigerian government’s recent actions and statements regarding the crypto industry have led to uncertainty and confusion within the crypto community.

While efforts to regulate the industry are understandable, there is a need for greater clarity and dialogue between the government and stakeholders in the crypto space. Addressing licensing challenges for local exchanges and refraining from unfairly attributing economic challenges to the crypto industry would be constructive steps toward fostering a more conducive environment for crypto innovation and investment in Nigeria.