Nigeria’s Central Bank begins boxing match against Bitcoin. Our money’s on Bitcoin.
Updated: Feb 6, 2021
There’s a television show I used to watch. It’s called Shameless. It is about the very poor and altogether ridiculous dysfunctional family of a man called Frank Gallagher. The man, Frank, is a drunk, a vagrant, and a profound mis-adventurer. He loves his booze, but he won’t say no to a smoke of crack, a snort of cocaine, a drag of weed, or any other drug for that matter. He is a villainous yes man. A vagrant of the highest degree. He has 7 children who as a result of their father’s absolute refusal to be anything but an addict, have had to raise themselves. They do not like their father. He steals from them, he extorts them, embarrasses them, and abuses them. Every time he comes around they know that there’s always more bad than good around the corner. The show is quite funny, but it is also very sad. It just occurred to me that this television show is quite a good metaphor for Nigeria, except, Frank’s never actually killed any of his children. Nigeria as we’ve learned has no problem killing its citizens.
Today (the 5th of February 2021, Nigeria’s Central Bank (CBN) issued an order to all deposit money banks, non-bank financial institutions and other financial institutions banning them from dealing in cryptocurrencies or facilitating payments for cryptocurrency exchanges. The news lit up social media like a flare lights up a subterranean cave and not without reason. On Paxful, a leading peer to peer bitcoin marketplace, Nigerians have traded 60,215 bitcoins valued at $566 million in the last five years; second only to the U.S.A. And according to data from Google Trends, Nigeria is first in global search interest for Bitcoin.
Nigerians were not pleased. Jola Ayeye, the Head of Development at Salt and Truth, one of the stars and creators of the I Said What I Said podcast and founder of the Happy Noisemaker blog said on twitter, “How does the Central bank Governor reason? There has to be something we don’t understand. This guy ran with the set that made crazy money in their 30’s and 40’s building the “new generation” banks. Now he spends all his time and energy making sure our own generation dies in debt and penury. What kind of wickedness? I think that’s what shocks me the most, the cruelty… Nobody is reading or interested in expanding their minds in CBN. They read textbooks and passed exams 35 years ago and think that is good enough to continue with in 2021. May we survive this administration. You can’t buy foreign currency, you can’t trade crypto, we are getting poorer every fucking day and the bank is busy doing fertiliser and cassava programs. But if we talk they will say our generation is just rude, never admitting their stupidity.”
I do not disagree with her. Even if Nigeria does have a few good policies directed at the young, the weight of its general operational incompetence is too heavy to render them effective. Young Nigerians have largely turned to technology and innovation to build legitimate wealth, but this is risky. Regulators are more known for blanket bans on financial instruments they do not understand than they are for constructive regulation.
I called a few people who work in finance to see what they made of the CBN’s order. Their names have been changed to protect their identities. Godwin Emefiele, has been known to call bankers to insult them when they criticise him in interviews. First, I spoke to Bisi Applebottom, an investment banker.
“Bisi what do you make of this new CBN order?” I asked.
“I’m not thinking about it at all.” He said.
“Why is that?” I asked.
“It’s because I can’t be bothered. In my line of work it’s best to stay away from trying to rationalise anything the Central Bank’s doing or any government policy for that matter. I just get on with it. I’m not an academic or some sort of activist I’m a banker. I do what I can to make my money.” He said.
“But do you think there’s any logical reason why they would issue this order?” I asked.
“To be very honest with you, I don’t know what their business is with crypto when people in the country are starving to death. And Nigeria seems to struggle with the most basic economic principles, like inflation, so I’m not sure they’ve got the bandwidth or the skillset to tackle crypto in any meaningful way. Having said that, it’s probably part of their drive to control the foreign exchange market. But I don’t think it’s very clever. It’s their inefficient policies that pushed people into cryptocurrencies in the first place. I think they should have left it alone.”
“Are there no good reasons for it?” I asked.
“They’ll probably say something about how transactions with cryptocurrencies are difficult to trace, and how they help money launderers, drug dealers, and other criminals move money around.”
I wasn’t satisfied so I called another friend who works in a Nigerian Fintech and knows a thing or two about regulators, Gashi Egusi.
“What did you make of the CBN order?” I asked.
“You only ever call me to use me as a source. You never call me to ask about my day. What happened to Happy New Year!” He exclaimed.
“Happy New Year.” I said.
“Very good. Now, I wouldn’t read too much into it.” He said.
“Why?” I asked.
“Because it’s going to be very difficult to enforce, and the CBN probably hasn’t set money aside in its budget for it. It hasn’t built the infrastructure to chase banks to find out whether or not their clients are using their bank accounts to trade in cryptocurrencies. And because of this, the banks will probably say, ‘Sir! Yes sir’ disturb a few of the more visible cryptocurrency exchanging companies and then after 2 weeks proceed to completely forget that the CBN said anything about it.” He said.
“Oh dear.” I said.
“The banks really only know what you tell them. And there are so many ways to trade in crypto that the entire thing is moot. They’ll trade peer to peer and it’ll be more difficult to track.” He said.
“And what about the Securities and Exchange Commission (SEC)… any word from them so far?” I asked.
“No. They’re pro business and the CBN isn’t. They say cryptocurrencies are securities until proven otherwise and that they’re under their jurisdiction and so issuers or sponsors of crypto assets must register them with SEC. If they were the ones leading the crackdown I’d be more concerned. They don’t mess about. The CBN isn’t as efficient.”
I wasn’t sure if my two sources had been thorough enough so I called a third, Georgette Rottweiler, who works in finance.
“Georgette, what do you make of this CBN order drama?” I asked.
“I have no thoughts. I’m just really amused.” She said.
“Why are you amused?” I asked.
“Because it is unsustainable. You can’t stop people from trading crypto. The CBN is a regulator. It should do its job and regulate, but it can’t stop it.” She said.
And it seems they were right, at least for the moment.
A Bitcoin marketplace, Buycoins Africa, said on twitter, “Thank you to everyone who has reached out. We are fully aware of the newest CBN circular and we will be working with regulators to ensure that our services are compliant. All trading on our platforms continues as usual and all user funds are safe.”
The story’s still developing and I’ll be following it closely. If you’re interested, scroll to the bottom of my website and subscribe.