In the heart of Africa’s largest economy, a digital revolution is brewing. With over $1.5bn worth of cryptocurrencies traded domestically in 2021, Nigeria’s fascination with crypto is alive and well, showing no signs of slowing down despite regulatory hurdles. However, as the mainstream public becomes increasingly introduced to this relatively new technology, it is vital to dispel some common misconceptions that often cloud the crypto conversation in Nigeria.
One of the major misunderstandings is the notion that cryptocurrencies are developed by and for criminals. This misconception arises because many people think cryptocurrencies like Bitcoin are anonymous. In reality, it’s the opposite – all Bitcoin transactions are transparent for the world to see. While it’s true that criminals can use cryptocurrencies, just like normal money, data shows that less than 1% of cryptocurrency activity is illicit. In fact, cryptocurrency scams are not as prevalent in Africa as they are in other regions.
Another misconception is that cryptocurrencies are too volatile to be taken seriously. The prices of cryptocurrencies are driven by short-term demand but more specifically, by people who understand how cryptocurrencies could benefit the world and believe they will become more widely adopted in the future. However, the scale of their belief is liable to change in the short term due to certain events having temporary impacts on prices. For example, a negative article in the mainstream media may put people off and the price of cryptocurrencies could experience a dip. On the other hand, news of a major company investing in cryptocurrencies or adopting it as a form of payment could help it go on a rally.
Public perception of cryptocurrency in contemporary Nigerian society often suffers from the dangers of a single narrative. Media portrayals frequently conflate cryptocurrencies with Ponzi schemes and depict crypto traders as reckless gamblers or even fraudsters. This narrative needs to change. Cryptocurrencies exist outside the control of governments and central authorities. In theory, they are immune to government interference or manipulation. Cryptography ensures secure online payments without intermediaries. Although intangible, cryptocurrencies hold value based on market demand and adoption.
Nigeria’s approach to regulating crypto-asset transactions has been unclear and inconsistent. In February 2021, the Central Bank barred financial institutions from these transactions. But in May 2022, the Nigerian Securities and Exchange Commission – the capital markets regulator – published a framework for their regulation. This was a sign that it approved of cryptocurrency trading. Then it backtracked in November 2022. In May 2024, the Central Bank banned person-to-person cryptocurrency trading in the naira.
Nigeria needs a balanced approach to regulation if the industry is to thrive without harming financial and monetary stability. A stable financial system is capable of allocating resources efficiently and managing financial risks. As Nigeria becomes more digitally-led, it is crucial to dispel these misconceptions and embrace the potential of cryptocurrencies. The future of finance is digital, and Nigeria must be ready to ride the wave.
