Crypto ban may not be the answer to Nigeria’s ailing financial problem

Nigeria’s dollars to naira rate has been at an astronomical high recently, getting past N1600 to $1 at one point. In addition to this, Nigeria’s economy has become so fragile in recent times, thanks to the rising cost of living, inflation, and most notably the high cost of PMS and other fuels. 

To say the least, the economic situation in Nigeria has become so difficult for the average Nigerian, that governments are grappling with the reality of things and in this confusion and quagmire, they found a scapegoat to whom they have ascribed all the blame.  And it’s cryptocurrency. 

Bayo Onanuga, President Tinubu’s Special Adviser on Information and Strategy, stated in an interview with Channels Television’s Politics Today in February that cryptocurrency is the cause of Nigeria’s ailing economy, even accusing cryptocurrency exchanges such as Binance and others of manipulating the dollar-naira exchange rate. According to Onanuga, the platform might devastate the country’s economy by arbitrarily fixing the foreign exchange rate. He stated, “If we do not crack down on Binance, it would devastate the economy of this country.

But to many, the ban on cryptocurrency in Nigeria is a testament to the inability of the present-day government to come up with actionable plans and policies to tackle an economy that has witnessed unprecedented economic woe that was never before experienced.

But could this be the solution? What are the long-term economic effects of the cryptocurrency ban in Nigeria, and what effects will it have on the continent at large, because Nigeria has the largest per cryptocurrency transaction in the world? These and many more questions beg for answers since this unprecedented move by the federal government.

This article talks extensively about the reason why crypto may be the answer while taking time to elucidate the negative impact of this ban on the growth and technology in Nigeria

Why cryptocurrency ban may not be the answer

Nigeria as a nation has witnessed several economic downturns in recent years. And with each successive government, the problem seems to become more complicated. 

While the Nigerian government has viewed cryptocurrency with scepticism since the onset, its position has not been different from that of other Nations, until recent times. The ban on cryptocurrency by the government was not just a cover-up on their failed policies, but also an opportunity to shift blame.

For example, the naira has been on free fall against the dollar, dating back to the military regimes and down to our transition into democracy. This is way far before the introduction of digital currencies. 

Most recently, the failed policies of this present administration have exacerbated the situation, thanks to the removal of fuel subsidies and the adoption of the floating of the naira.

Taking a more objective view of the economic landscape of the nation, one will agree with me that the floating of the naira, though a good intention, has blown out the lid, and revealed the state of the economy. It made everything bare, it showed us our weaknesses and what we must do.

Nigeria as a nation is too reliant and over-dependent on the dollar, and by the normal law of demand and supply, the dollar will continue to gain wide dominance over the naira. This goes a long way to show that, until we adopt a more holistic approach to put a cap on the dollar, the naira will continue to fall. 

Nigeria’s problems lie in the fact that our foreign reserve is highly depleted and also we are not an export-dependent nation. And so there is no surplus of dollars, rather the dollar is scarce leading to an increase in demand. 

Another perspective on this problem lies in the so-called removal of subsidies. While this might also be a good policy, it was not well implemented, and the necessary considerations were not put in place. For as long as we still have to import fuel to serve the Nigerian populace other than depending on our local refineries, it will also continue to have direct effects on the dollar, and most importantly, inflation and the high cost of getting the product will always be expected.

So, in the forgoing situations, the rise of the dollar has little or nothing absolutely to do with cryptocurrency currencies, but rather the more deep-rooted and existential problem that this present government has not been able to proffer sustainable solutions to.

While the Nigerian authorities have cast a wary eye on cryptocurrencies, attributing various economic challenges to their rise, arguing that crypto trading has facilitated capital flight, undermined the local currency, and posed risks to financial stability, it should be noted however, that the cryptocurrency market has largely retreated, and yet, the naira continues its downward spiral

And on a more realistic tone, one should be afraid and anticipate the effects this cryptocurrency ban would have on the economy and the continent at large.

Impact of cryptocurrency ban on the Nigeria economy

Nigeria as a growing technological hub ought to embrace emerging technologies in other to stay and remain a dominant player in Africa, if not setting the pace. But the reality on the ground is that this may be a remote possibility, because cryptocurrency and Web 3, which is instrumental to the present-day technological age have been stiffened by the government. So what are the overall effects in Nigeria and the continent at large? Let’s take a look at some of them.

1. Continuous depreciation on the naira

A ban on cryptocurrency can be seen as an incentive for increased dependability on the dollar.  Over the years, the use of cryptocurrency as a digital alternative to the dollar has been accepted by some organizations, while others have rather invested their money in several cryptocurrency projects.

Now, everyone is forced to depend on the dollar, especially as the only means of foreign exchange, which in turn puts a strain on its flow.  This will ultimately lead to higher demand for the dollar, causing the naira to depreciate more

2. Reduced technological inclusion

We’re in an era of such technological booms, thanks or AI and the Advent of blockchain technologies. And most importantly, the gradual introduction of Web 3 and all its capabilities. Putting a cap on the cryptocurrency industry in Nigeria will have a so deep and immeasurable impact on our participation in these technologies.

Something so odd for a nation such as Nigeria that ought to be at the forefront of any emerging technological advancement in Africa

3. Increase unemployment

The ban on cryptocurrency in Nigeria ultimately adds to the woes of the average Nigerian. From the report, it was found that a larger percentage of Nigerians, especially the youth engage in one form of crypto activity or the other.

And this serves as the means of livelihood for many. The implication of the ban means, many youths have been rendered unemployed, which has added to the already saturated unemployment rate in the country

Conclusion

Nigeria should emulate the government of other civilised nations and put a watchful eye on overseeing the cryptocurrency industry, rather than a total ban on it.

The potential and implications of cryptocurrency are enormous, as well as the threats. But Nations have come to realize that cryptocurrency and blockchain have come to stay, and if any nation must stay ahead, it must embrace the prospect it brings, while seeking ways to curb its excesses.

As for Nigeria, the government ought to look inward because the economic problems befalling Nigeria today are not new, and neither can they be empirically attributed to cryptocurrency. To say the least, these claims are baseless.

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Paul Umukoro

Paul Umukoro

Paul Umukoro is an astute content writer with makemoney.ng. He writes mostly on hot, contested, and valuable topics in business, finance, and technology. He majored in computer science.

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