With the growing popularity in cryptocurrency trading and investment in Nigeria despite its ban by Nigeria’s apex bank Central Bank of Nigeria (CBN), DANIEL UDECHUKWU examines why it is gaining more traction than the traditional forms of investments.
Emmanuel Ntekim is in his early thirties, but he has already set plans in motion to maintain high standards of living even at old age. He states that his job’s insecurity and the poor monthly salary can hardly sustain him, talk more of imparting the lives of the people around him with his resources. “With the current financial woes facing Nigeria, it is necessary that we look for other methods of generating income and securing our future, Cryptocurrency trading or investment is a viable solution for all of us.”
This is the story of many Nigerians, especially young Nigerians who engage in various online investments to see how they can make ends meet. Nonso Obi who shares the same view with Mr Ntekim said the high returns in investment was his driving force for trading in cryptocurrencies. According to him: “It is majorly because of the endless financial benefits that come with it that made me start trading on cryptocurrencies. One can make tons of money by investing and trading different types of cryptocurrencies. It is just like buying the stock of a company and making money as the company makes more profits only this time you will be buying digital assets.”
Aside being a major or supportive source of income, what other benefits can be behind its growing popularity and investment? Tobechukwu Ejiofor, a 27-year-old investor and trader describes its benefits as endless. “The benefits of venturing into cryptocurrency are endless,” he stated. “It can be an additional source of income, it can be a retirement plan for long time investors, user autonomy because it is decentralised.
The flexibility of payment and transactions is limitless, transactions are discreet, fast payment. Also, major brands like Starbucks, Paypal, Tesla, etc have adopted cryptocurrency, this shows that it will be part of our daily life in the nearest future. So, it is beneficial to be early,” he concluded.
With reports and estimates that Nigeria is one of the largest market for cryptocurrency trading and investment, who are the major players in the industry?
With the clampdown on cryptocurrency trading in Nigeria, it is hard to point to major players in the country as some platforms have either suspended their services or stopped providing services. However before the ban, some foreign based and local crypto start-ups have provided platforms for Nigerians to trade and make investment. Among the major players in Nigeria are Binance, Luno, Paxful, Buycoins, Bundle and Quidax.
On February 5, 2021, the Central Bank of Nigeria sent a letter to all deposit money bank, non-bank financial institutions and other financial institutions prohibiting dealings in cryptocurrencies and facilitating payment for cryptocurrency exchanges.
The letter reads in part, “…are directed to identify persons and/or entities transacting in or operating crypto currencies or facilitating payments and ensure that such accounts are closed immediately.” In a statement released on February 7 to justify its letter to financial institutions on February 5, it cited the need to protect the general public and safeguard the country from potential threats posed by “unknown and unregulated entities” that are “well-suited for conducting many illegal activities”.
Since its announcement, many Nigerians have reported that their bank accounts have been frozen due to cryptocurrency-related activity. Others are receiving warning from either their account officer or bank manager to desist from all crytocurrenccy related transactions or have their account closed.
According to a report by Quartz Africa, ‘one regular crypto trader who requested anonymity said on a couple of occasions, he had received calls from his bank manager warning him to desist from “illegal trading of crypto,” or risk losing his account and funds. “To bypass banks, we carefully delist crypto-related information from transaction details, or else you’ll be locked out of the system and lose everything,” he said. “So right now, it’s about our survival, banks don’t want transparency.”’
The directives have however drawn reactions from some government officials including the vice president of the country, Prof Yemi Osibanjo. He called on the regulatory body to rather find ways of regulating the industry than outright ban. “I fully appreciate the position of the central bank, the Securities and Exchange Commission and … the possible abuses of cryptocurrencies,” the Vice President Osinbajo said.
“There’s a role for regulation here and it is the place of our monetary authorities and SEC to provide a robust regulatory regime that addresses these serious concerns.”
Impact of ban
Mr Ntekim like many traders in Nigeria is not giving up on trading and investment on cryptocurrency. He revealed that they have adopted methods to boycott financial institutions in their transaction. “It has affected the sector but it was nothing we could not manage,” he said. “The ban stopped Nigerians from buying cryptocurrencies from their usual exchanges with their debit cards or directly from their Nigerian bank accounts, it also killed a lot of fintech companies that were pivoted in the sector, but it did not put things to a total stop since we can still do transactions through pair-to-pair (P2P) method,” he added. A report by Quartz Africa shows that: ‘according to data from Coin Dance. Weekly buying and selling is regularly exceeding 1 billion naira ($2.6 million), which is comparable to the volume seen before the central bank took action.’
Crypto currency trading and investment is not all rosy as it sounds. There are basic precautionary measures that should be followed to avoid losing all investment. Mr Ntekim offers some advice: “
The major pitfall that anyone going into cryptocurrency should be concerned about is the high volatility of the market. A lot of investors base their decisions on sentiment and this can cause monumental positive and negative shifts in the sector. You could wake up to a 500% increment of your asset because there is a piece of positive news about the asset that people are keying into and it can also go the other way 500% decrement if the news is bad,” he warns.
Olushola Ademola, a young fashion designer has friends who trade in cryptocurrency, but he has chosen to stay away. He echoes Mr Nketim’s warning. “My friends are into it and they tell me it’s about its Highs and lows,” he revealed. “When they are in town, some of them come around my place and I happen to see most of them stay up almost all night trying couple of trades. Some days, they make good money before dawn, and in other days they lose. Considering the nature of my job and the level of commitment required to do crypto, I can’t venture into it,” he stated.