How Nigerians are circumventing CBN Ban to continue using Cryptocurrency
On February 5 2021, the Central Bank of Nigeria issued a letter to all ‘Deposit Money Banks, Non-Bank Financial Institutions and and Other Official Institutions’ banning cryptocurrency. This was not the first time the CBN would be raising objections against the use of crypto-currency as a form of tender. This time however, it instructed banks to stop allowing the trading and payment of cryptocurrencies through its platform and to also identify and report accounts of Nigerians engaging in it.
This directive drew reactions from Nigerians particularly on social media with many accusing the CBN governor, Godwin Emefiele, of not being in tune with global financial trajectory. Some speculated that the ban was announced due to the role cryptocurrency played in the November 2020 EndSars protest which made it difficult for the government to freeze the accounts as they eventually did with bank accounts.
Cryptocurrency is a peer-to-peer form of decentralised digital currency whose transactions are recorded in a form of program called blockchain. Forbes describes it as a “decentralized digital money, based on blockchain technology. You may be familiar with the most popular versions, Bitcoin and Ethereum, but there are more than 5,000 different cryptocurrencies in circulation.”
The first cryptocurrency and the most popular as well as the most valuable is Bitcoin which was founded in 2008 and went into use in 2009. Then it was considered an alternative form of payment that was faster and more secure. It was also not susceptible to international exchange rate as it was a form of currency not backed by a bank or institution, a 2016 Guardian article detailed how Nigerians, Kenyans and South Africans were using it for international transactions as well as remittances. According to Bitcoin.com, Nigeria led all other countries in daily usage of Bitcoin largely due to exchange rate and volatility of the Naira.
From being a transactional digital currency, the rise in the value of cryptocurrency over the years has transformed to an investment. Now, more people buy cryptocurrencies for its growth value like they would a stock and sell when the value increases. Before the CBN ban on cryptocurrency, Nigerians used bank debit cards to transfer money from their bank account into a Naira wallet on an exchange platform like Binance. The naira is then used to purchase the cryptocurrency equivalence on the platform like Bitcoin. The coin is then used as a form of monetary exchange which can be sent to anyone with a wallet anywhere in the world. With the rise in value of cryptocurrency, many bought for the purpose of trading it like a form of stock. To change the cryptocurrency back to Naira, it is transferred to the Naira wallet and sent into a Nigerian bank account.
Following the CBN ban, many of the cryptocurrency platforms revoked the Naira wallet making it impossible to transfer from a Nigerian account to a Naira wallet and vice versa. To circumvent this, most turned to exploiting the peer-to-peer feature of cryptocurrency transactions to the fullest. Peter Uka who has been using cryptocurrency since 2017 said the process is a bit complex but that many Nigerians already understand and use it.
“When the ban was announced, my coins were locked inside Luno (an exchange platform). I sent them to my account on Binance where I sold them on the trading platform to another buyer who paid the naira equivalent to my Nigerian bank account.”
He explained that Binance mediates between buyers and sellers to verify that the buyers receive their coins and the sellers receive the same value in their bank account.
“To buy any coin now, what i do is to go on the trading app and see those who also want to sell. If I see anyone who wants to sell within the amount of what I intend to buy, I initiate contact on the peer-to-peer platform. I only select those who have the option of receiving funds in Naira. I make sure to leave the description blank. This is because using words like Crypto or Bitcoin can raise alarm and the card can be flagged by the bank. When the person receives the naira equivalent and confirms it, they then send the coin to my wallet. At that time, Binance would have locked the person’s account and it will only be released after the transaction has been confirmed by both parties. It is also the same process for converting cryptocurrency into Naira.”
Peter said he rarely converts his cryptocurrency into Naira now and instead focuses on the ‘market’ to buy different coins.
“This is where I put 100% of my savings and I have not regretted it yet. Although in the past few days, the values of most of the coins have dipped, I am even buying more because it will still go up. The CBN ban has not affected my usage of cryptocurrency.”
Another cryptocurrency user, Lanre, told Neusroom he does not use trading platforms but that he has a group of trusted friends who exchange cryptocurrency and the naira equivalent among themselves.
“It’s peer-to-peer so no CBN ban can affect my crypto wallet. I belong to a Whatsapp group where we do these transactions. If anyone in the group wants to buy coins, he sends the Naira equivalent to another person in the group who wants to sell. The seller confirms the money and sends him the cryptocurrency equivalence. He admits this may be risky if the person refuses to send him the coins after receiving the naira equivalence.
“Life is a risk so I understand the risk but the Whatsapp group is a close-knitted one. We are all friends and have been doing this for a long time and no one has had any problem. We do not intend to accept any new person.”
Many Nigerians have vowed to continue to use cryptocurrency. Since the ban, Nigeria’s peer-to-peer usage of cryptocurrency has reportedly increased by 15%.
