Nigeria clarifies crypto regulation after Bitcoin traded at a 60% premium

Nigeria's central bank is now rejecting claims that cryptocurrencies have been banned in the country. A senior official from the Central Bank of Nigeria (CBN) said that instead, the bank has only protected the banking sector from the new asset class, not trading crypto.

The central bank is not discouraging crypto trading

The deputy governor of Nigeria's central bank, Adamu Lamtek, recently clarified the CBN's stance on cryptocurrencies, stating that the bank had not banned residents from buying, trading or selling crypto. 

At a seminar at Abuja, Lamtek recently reportedly stated that the central bank merely protected the banking sector from cryptocurrency-related activities. He claimed:

The CBN did not place restrictions from use of cryptocurrencies and we are not discouraging people from trading in it. What we have just done was to prohibit transactions on cryptocurrencies in the banking sector.

Last month, CBN governor Godwin Emefiele previously banned banks from servicing cryptocurrency exchanges in the country. A circular was issued by the CBN, stating that the ruling has come as an extension of the prior warnings regarding the risks associated with digital assets. 

As a result of the ban, the CBN demanded all commercial banks close accounts that belonged to crypto exchanges or businesses involved with transacting in digital currencies in Nigeria. Shortly after the publication of the ruling, banks and other financial institutions have begun complying with the directive.

The central bank stated that stiff penalties would be imposed if the bank or financial institution failed to comply with the regulation.

This clarification comes after India proposed a new law on a blanket ban of cryptocurrencies in the country. However, a glimpse of hope remains as the Finance Minister said they are "not shutting off all options."

Traditional remittances decline as crypto popularity rises 

Cryptocurrency trading in Nigeria has become widely popular due to the loss of faith in traditional forms of investment in the country. Statista found that 32% of those surveyed in Nigeria used cryptocurrencies, indicating the world's highest proportion of users. 

Nigeria ranked third in terms of cryptocurrency volume trading in 2020, behind the United States and Russia. Alternative currencies to fiat, such as digital assets, have been attractive to Nigerians with its challenging economic environment, having eased out of its second recession in less than five years. 

Traditional remittances sent to the African country have also been in decline, from $2.05 billion in January 2020 to $54.5 million in September in the same year, according to Nairalytics.

60% premium on BTC in Nigeria following the ban

While Bitcoin has been making new all-time highs since the start of 2021, the digital currency's price has vastly varied across different continents. Crypto prices will ultimately differ between countries due to reasons such as bureaucracy and nation-specific laws.

Shortly after shutting down all crypto-related bank accounts in Nigeria under the regulation set out by the CBN, Bitcoin traded at a 60% premium in the country after the ruling was set in place, a peak recorded on February 19, 2021. 

With the highest Bitcoin adoption rate — and with many more Nigerians exploring crypto assets for international remittances, there is no sign of slowing demand for the new asset class in the country.