According to a local media report, Nigeria is considering legislation to legalize Bitcoin and other cryptocurrencies.
The Nigerian House of Representatives Committee on Capital Markets and Institutions chairman Babangida Ibrahim disclosed the news to Punch Newspapers on Sunday, December 18. The plan is a significant step forward for the African economic powerhouse and may serve as a model for other regional regulatory authorities.
Once this bill is passed, the Nigerian Securities and Exchange Commission (SEC) will acknowledge cryptocurrencies as legal investment capital. Furthermore, it will amend the Investment Securities Act of 2007 and detail how the Nigerian Central Bank manages digital currencies.
According to Ibrahim, Nigeria needed an effective and vibrant capital market, and keeping up with global practices was one way to accomplish this.
“In recent times, there are a lot of changes within the capital market, especially with the introduction of digital currencies, commodity exchanges and so many other things that are essential, that need to be captured in the new Act,” Ibrahim said.
Nigeria's ban on crypto investments
Nigeria officially banned the use of bitcoin in February 2021 with a statement forbidding regulated financial businesses from "dealing" with cryptocurrencies.
Even after the ban, Bitcoin Magazine reported that Nigeria had exceeded the United States as the nation with the highest volume of bitcoin peer-to-peer trading. Chainanalysis reports also suggested that Nigeria had drastically increased bitcoin adoption.
Bitcoin is the most searched word on Google in Nigeria out of any other country. According to CoinGecko research, Nigerians were the most interested in cryptocurrency in April of this year.
Bitcoin activities also have a substantial presence in the country despite lawmakers clamping down on its usage. Nigerian entrepreneurs have built Bitcoin Village, dubbed “a safe haven” for Bitcoiners to engage in numerous innovation and philanthropic projects.
Despite the ban, Ibrahim claimed that there is a flaw in the system that causes most Nigerian investors only to trade these digital assets using local accounts. Such transactions were not permitted under the Central Bank of Nigeria's regulatory framework.
According to Ibrahim, these are why the country aims to regulate digital assets. As a result, the relevant act needed to be amended to include regulatory guidelines for new financial products like cryptocurrencies, commodity exchanges and derivatives.
Establishing a cashless society
Following the ban, Nigeria also launched the eNaira, Africa's first central bank digital currency (CBDC). The CBDC, however, has yet to be widely accepted as expected. The government has made several efforts to encourage its usage through incentives, but adoption is still very low, with a 0.5 percent adoption rate as of October, 12 months after its introduction.
A year after launching eNaira, Nigeria announced cash withdrawal limits to encourage the use of alternative payment methods. The CBN set new weekly limits on over-the-counter withdrawals at $225 for individual citizens and $1,123 for enterprises.
Nigeria’s cashless policy also limits ATM cash withdrawals to $45 daily, with only $0.45 notes and smaller denominations accessible from the machines. Individuals are able to withdraw more sums in some cases but will be charged a processing fee of five percent to 10 percent.
The CBN said, "Withdrawals above these limits shall attract processing fees of five percent and 10 percent, respectively."
The new policy will go into effect on January 9, 2023, roughly three weeks before the country retires all old ₦200 ($0.45), ₦500 ($1.12) and ₦1000 ($2.24) notes.
According to a Bitnation report, top cryptocurrency exchange Binance has featured 12 Nigerian banks in its P2P platform to reduce potential disruptions. It will also develop a digital economic zone to assist small crypto users and entrepreneurs in gaining crypto education.