Cryptocurrency ban will put pressure on naira- expert

By Olusegun Obisanya

Economy and capital market analyst, Mr. Rotimi Fakayejo has said that the ban on cryptocurrency by Central Bank of Nigeria’s (CBN) is going to impact the economy negatively. Specifically, he noted that it will put pressure on national currency and foreign exchange, saying authorities should have considered economic gain if cryptocurrency is adequately legislated on and properly managed.

Speaking to Gentechnews in Lagos last week on the relevance and impact of cryptocurrency ban on the economy, Fakayejo feared that CBN action might compel people to explore the Import and Export (I & E window) opportunity to get the digital money in dollar.

The financial expert said, “The ban is going to affect Nigeria negatively because it is going to put pressure on foreign exchange. Before now, you can buy bitcoin with naira in Nigeria. If you get to Singapore, you can liquidate your bitcoin to dollar and use it to buy whatever you want to buy and bring it to the country. But now, if that is blocked, people will run to I & E window and bureau de change and the black market to get their dollar.

“So, they are not thinking at all because there are some things that will come up with feedback. Those in authorities should have considered economic gain if the digital currency space is well managed as it is being done in other climes but not so in our country. We should be careful not to harm the economy further. Mark my word, the ban is going to put pressure on the naira. In another month, we will see how naira will trend.

“But this is the same government, last year, that Security and Exchange Commission (SEC) was contemplating or planning to bring up regulations that will guide the activities of crypto currency trading in Nigeria. For them to come up all of a sudden and say that it is being banned, is something else.

Fakayejo, who noted that digital currency is recognised in advanced economies like America and Europe added, “What government should do would have been for them to tame or train anyone that is engage in terrorism rather than outright ban. A lot of countries are trying to develop cryptocurrency that will better their future; in Nigeria, we don’t do things until it is too late.

“And whether we believe it or not, though crypto currency is very volatile, but at the same time, it has created wealth for quite a number of people. This is Bitcoin that was trading at about US$6,000 at about the time pandemic started. And today, that crypto currency is trading at about $45,000. If we have Nigerians, as we do have Nigerians that are partaking in it, it has quite added to their net worth. And Nigeria is known as the second largest trader country in cryptocurrency. For them to say they want to punish banks or whatever, for having allowed their platform to be used, I don’t think it’s really going to make a lot of sense.”

Blockchain solutions architect, Sterling Bank, Mr Charles Okafor Mbah, in an interview (not with Gentechnews), noted that crypto trading is divided into formal and informal exchanges.

“There are the formal exchanges, like Binance, which is the most popular; and Patricia. We have some other players, like BuyCoins and Bundle Africa. If we put (together) the figures from these traders, we could be seeing a huge amount on a weekly basis.

While speaking on job creation occasioned by crypto trading, said, “My mum is going on 65 years old and she trades in crypto, so it is not just the youth that it is going to affect. It is also affecting the older generation.”

He noted that crypto exchanges employed blockchain developers, some of the highest paid programmers, saying, “As of 2020, blockchain developers are highly sought after around the world.”

Speaking in the same vein, the Chief Operations Officer, Lam agro Consult Ltd and former chairman, Chartered Institute of Bankers of Nigeria, Lagos State branch, Mr. Bolade Agbola said CBN acted to protect the economy and foreign exchange.

The former banker said, “The challenge we are facing now is that we are having a crisis in our hand because of dwindling foreign exchange inflow. It’s unfortunate that because of the opaqueness of cryptocurrency, it is possible for it to be used to finance activities that are not open. So, given those two scenarios, it is very difficult to force CBN in trying to control it because the truth of it is that we have forex inflow challenges, and if you look at the operations of cryptocurrency, it’s totally a way of foreign exchange depletion – everybody is saving in it.

“However, if you look at it from freedom of people to do whatever they do with their naira, yes it is good for complaints to come. But if you look at the overall impact on the economy, I think given the times we are in, it is difficult to blame CBN for the action it has taken. The ban is to ensure it is not draining out our foreign exchange and it is not used to finance opaque, illegal activities by insurgent groups.

“There is no way cryptocurrency can add to our forex is very limited because we are putting money in foreign instrument. Definitely, that pressure is also a challenge for CBN to manage. But you also look at the freedom of people to money for whatever they like and begin to open up the economy. But we don’t have a balanced economy. So, if the economy is over-opened, of course, we will have a negative outflow – everybody will want to save in dollar, then the currency can never stabilise.”

Similarly, the Founder and Managing Director, Cowry Asset Management Limited, Mr Johnson Chukwu said the CBN policy would have an impact on the cryptocurrency trade in the country and render some citizens unemployed.

“I have seen a couple of young Nigerians who have made reasonable income from cryptocurrency trading. Remember, Nigeria is largely a youth-populated country, and we have many educated people but who may not be fully employed.

“Because of that, many of them are into cryptocurrency trading and they understand it. So in effect, we may be cutting off their source of income and fiscal engagement. There will be some impact on the income of cryptocurrency investors,” he said.

Chukwu said despite the concerns about cryptos by the apex bank of the possibility that they could be used to fund illegal transactions like terrorism, closing the accounts of investors needed not to be.

“There could have been only warnings so as not to exclude investors from the financial system completely. The CBN should find a way to harness the positive side of the new knowledge to advance the society,” he said.