From boom to gloom — the rise and fall of crypto trading in Nigeria

Before venturing into digital assets, Adedayo Adebajo, managing director of Jelurida Africa DLT, a cryptocurrency trading platform, was unemployed. He started a career in crypto trading before rising through the ranks to an expert level in the blockchain space.

In an interview with TheCable, the one-time job seeker said he currently manages a team of crypto traders in Africa, and mostly in Nigeria.

Adebajo, like many other Nigerians, saw the emergence of cryptocurrency as a glimpse of hope to earn a decent means of livelihood. But with the decision of the Central Bank of Nigeria (CBN) to ban such activity, the hope seems to be dashed while gloom appears to be in sight.

“Personally, after years without a quality job, I started my career in the blockchain space as a trader till I got here,” Adebajo said.

“Currently, I manage a team of over 15 people across Africa most of which are from Nigeria in a blockchain company. They are well compensated more than the government would pay if recruited at all by any government agency as starters.

“This is happening all over the country with a lot of start-ups providing blockchain and crypto services providing employment to Nigerians locally and internationally. Imagine those lucky to be gainfully employed now thrown back to the streets as it’s a bomb about to explode next to those who lost their jobs during the pandemic.”

CRYPTOCURRENCY AND DIGITAL ASSETS TRADING IN NIGERIA

Prior to 2008, efforts were made to create online currencies with ledgers secured by encryption. Such efforts led to the emergence of B-Money and Bit Gold, which were formulated but never fully developed.

In 2008, Satoshi Nakamoto, an anonymous entity, released a paper called Bitcoin – A Peer to Peer Electronic Cash System to a mailing list discussion on cryptography. The paper led to the birth of Bitcoin, the first cryptocurrency, in 2009.

As bitcoin gained prominence, rival cryptocurrencies emerged triggering competition. Among such cryptos were
Namecoin and Litecoin. Today, over 1,000 cryptocurrencies exists with new ones emerging on a daily.

In Nigeria, cryptocurrencies have been embraced with youth investing knowledge and funds in making profit from trading digital assets. The country had gained top position as the highest cryto trader in Africa. On several occasions, it topped search trends for bitcoin and also welcomed its first bitcoin machine in 2020.

Data from Coin Dance by Paxful, a leading peer-to-peer bitcoin marketplace, shows that Nigeria has the world’s second-largest bitcoin trading volume as Nigerians traded 60,215 bitcoins in the last five years, or more than $566 million — a rating documented by TheCable index here.

UPDATE: #Nigeria has traded over $566 million in #Bitcoin in five years on a single platform

US – $3,755,463,837
Nigeria – $566,668,692
China – $181,329,392
Canada – $131,108,721
UK – $119,440,278

Source: QZ Africa#TheCableIndex @cenbank pic.twitter.com/oouynkE1eE

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— TheCableIndex (@thecableindex) February 5, 2021

The company said Nigerians make up around a quarter of its customer base with 1.3 million registered accounts.

“They mostly use the platform for peer-to-peer and arbitrage trading,” Nena Nwachukwu, Paxful Nigeria regional manager, had said.

Blockchain.com, another crypto platform, in a report publish on August 5, said Nigerians usage of its web wallet increased by 60 per cent since April 2020, while describing the country as the “most trending country in recent months”.

“Nigeria has also been the country in the world with the most relative interest in Bitcoin according to Google search data,” the report reads.

More Nigerian startups and fintech companies had emerged, tapping into the cryptocurrency industry. All of these validate Nigerians acceptance of the digital assets and their readiness to create wealth from it.

UNEMPLOYMENT, GOVT BARRIERS AND THE VOID CRYPTO TRADING FILLED

The emergence of cryptocurrency in Nigeria led to the filling of several gaps such as unemployment and government supervision. A recent example was during the #EndSARS campaign against police brutality. Amid government clampdown on organisers and influencers of the protest, protesters adopted the use of bitcoin for contributing and sustaining the protests.

The National Bureau of Statistics (NBS) in its Labour Force Statistics report of August 2020 noted that the number of unemployed Nigerians went from 20.93 in 2018 to 21.76 million in the second quarter of 2020. While the clamour for job creation has been emphasised, experts believe that the ban on cryptocurrency will worsen the country’s unemployment figure.

In an interview with TheCable, Mfreke Bassey, a forex trader, said the ban on crypto currencies by the CBN “will have a negative impact on job creation in the country and unemployment in Nigeria”.

“The lack of employment opportunities in Nigeria has become an anthem sang by Nigerians for years now, and we all know that. So we will see an increase in the number of unemployed Nigerians at least by 3% if this ban is not lifted. This industry was a safe heaven for graduates,” he said.

Inobong Williams, a cryptocurrency analyst, shared similar opinion on the implication of crypto ban on unemployment. He said a lot of Nigerians in the industry will lose their jobs.

“The CBN ban will affect a lot of people that have jobs with exchanges. This is because those exchange can no longer do business with banks. This will directly affect their inflow which could lead to staff layoff,” he said.

CBN BAN, ARGUMENTS AND COUNTERS

In January 2017, CBN had said digital currencies such as bitcoin, litecoin, and others are largely used in terrorism financing and money laundering, considering the anonymity of virtual transactions. It had also said that such currencies are not accepted as legal tender in Nigeria.

In February 2018, the apex bank also issued a warning to people who invest in cryptocurrencies, saying they would be unable to seek legal redress in the event of collapse because they are not protected by the law.

But none of these earlier warnings conveyed shock to cryptocurrency stakeholders as the directive issued on Friday, when the CBN asked Deposit Money Banks (DMBs), non-bank financial institutions and other financial institutions to close accounts used for crypto transactions within their systems.

Nigerians had taken to social media to condemn the move, accusing the federal government of promoting hardship among its citizens.

Celebrities, including DJ Switch, Nigerian disc jockey-turned-activist, condemned the ban and accused the federal government of promoting poverty.

Experts believe that the development will have a negative impact on several companies, particularly in the fintech industry, as Bassey said “the ban will have a negative implication on fintech companies because peer to peer transactions will not only affect the price of crypto per dollar, it will also be difficult to find a buyer or seller which will affect the volume of crypto transactions per day”.

Despite widespread condemnation of its directive, the CBN maintained that it would not reverse the ban, saying other countries including China, Canada and Saudi Arabia, have made “similar pronouncements based of the significant risks that transacting in cryptocurrencies portend- risk of loss of investments, money laundering, terrorism financing, illicit fund flows and criminal activities”.

WILL THE BAN ON CRYPTOCURRENCY TRANSACTIONS BE REVERSED?

A mixed feeling revolves around whether the CBN will reverse its ban on cryptocurrency trading. Bassey said the probability that the ban on cryptocurrency will be reversed is high.

“This is because only change is constant and other countries with better economy than that Nigeria has embraced this change as well as institutions,” he said.

Atiku Abubakar, former vice president, while reacting to the development, had argued that now is “the wrong time to introduce policies that will restrict the inflow of capital into Nigeria, and I urge that the policy to prohibit the dealing and transaction of cryptocurrencies be revisited.”

Williams, another blockchain enthusiast, had said a review of the industry to include remittance in terms of taxes and levies will be a better option for the country, as against outright ban.

“If stakeholders come together and create a clear pathway for remittance in terms of taxes, levies or commission to the government. I think the regulation maybe reversed. There is so much the government stands to gain if they tax and regulate the industry rather than ban it,” he said.

Meanwhile, Adebajo, the Jelurida MD, said the CBN ban on the crypto is “a major and unexpected blow”. He expressed optimism that the future still evolves around transactions “with little or no dependency on banks”.

He said the world is moving to “an era of competing and untamed innovations where people will not work with caged outlined rules and create solutions outside of the box, while regulation catches up later”.

“Right now, most are still shaken by this. But then, it’s a matter of using foreign banks as most are turning to the likes of Ghana for banking services at the moment. Naira was said to have been losing value in the foreign exchange market. I think it is just the beginning,” he said.

“Some of the fintech companies are currently stagnant, while they also figure out the way forward. Some startups due to be launched are also considering the various alternatives most of which include cutting out the banks and to an extent cutting out the use of Naira as well. But at the end of the day, services will be rendered and innovations will move on.”