In 2021, Nigeria’s Central Bank adopted a rigid attitude towards the cryptocurrency sector, forbidding local banks from taking part in cryptocurrency exchanges. Subsequently, nearly one and a half years later, media outlets reported the possibility of a change in policy that would allow for cryptocurrency to be regarded as a capital resource for investment.
The Central Bank of Nigeria (CBN) has issued an 83-page policy document titled ‘Nigeria Payments System Vision 2025’ that mentions the potential of stablecoins, the use of blockchain technology to power a central bank digital currency (CBDC) and regulatory implications of initial coin offerings (ICOs).
The document states that there are eleven advantages of having a CBDC, including the ability to better control currency value and to track and prevent illegal activities. The CBN also considers the introduction of stablecoins, but wants to develop a regulatory framework for implementing them in Nigeria. With regard to ICOs, the Bank believes there is “little appetite” for the adoption of existing ICOs due to the lack of regulation, but sees potential in using them for fundraising for capital projects, peer-to-peer lending and crowdfunding.
The document also discusses the use of smart contracts and the eNaira, Nigeria’s CBDC pilot program, which has failed to gain traction among citizens. Despite this, Google search data shows that Nigerians have an interest in cryptocurrencies. Adesoji Solanke, a fintech and banks director at Renaissance Capital, believes that the adoption of the eNaira would require superior use cases that appeal to customers, merchants and other participants in the financial system. In addition, there needs to be incentives for adoption, such as low or zero transaction fees and functionality that transcends financial services.
The CBN and the Nigerian Securities and Exchange Commission would need to work together on the potential adoption and regulation of ICOs, and the Bank is likely to look at creating regulatory clarity for stablecoins. In 2021, the Bank had banned local banks from servicing cryptocurrency exchanges, but there have been reports that this may be amended to recognize cryptocurrency as capital for investment.