Nigeria banned cryptos, introduces CBDC

nigeria-twitter-ban-protestNigeria has introduced its CBDC (Central Bank Digital Currency) called the eNaira. It had banned all crypto usage in the country earlier this year.


The economy and cryptocurrencies

  • With 211 million citizens and a GDP of $480 bn for 2021, Nigeria is Africa’s largest economy.
  • Economic development has been hindered by years of public corruption, military ruling and mismanagement.
  • 30% of its economy comes from farming. Oil represents 40% of the GDP and 80% of the governements income. Remittances represents the country’s second source of foreign exchange.
  • Organized crime is substantial, notably financial crime and money laundering.
  • The population is growing fast. It is diverse and divided. International observers consider that the lack of education is driving Nigeria into a failed state.
  • Nigerian-youthAlso, 62% of the Nigerian population is 24 or younger.
  • Unsurprisingly the country ranks 6th in the world for cryptocurrency adoption, but it is also one of the world’s least “banked” economies.
  • The digital platform Paxful is the leading system used in Nigeria, with 1.5 million users (and 7 million globally).
  • The new currency will become the second largest CBDC in the world, after the Chinese Remnibi.
  • It is expected to increase the economy by $29 bn (6%) over the next 10 years.
  • The eNaira is pegged to the national currency, which was twice devalued this year and suffered years of underperformance.

eNairaThe deployment had some glitches.

  • The new CBDC was deployed by Bitt, which also managed the East Caribbean digital currrency DCash.
  • The launch was delayed from October 1st (Nigeria’s independence day) for technical reasons.
  • The Android app failed on the day after after the launch and was removed from the Google App store after 100,000 downloads.
  • The Central Bank immediately indicated that it would not be liable for any loss.
  • Attorneys believe that the waiver has limited power, since the introduction was organized under teh name of the Central Bank, not by a commercial institution.

Nigeria forbade cryptocurrencies

  • In February, the Central Bank had banned all banks and commerce from accepting or facilitating cryptocurrencies operations. It considered cryptocurrencies as a threat to the financial system.
  • Among the reasons, we can probably see:
    • NGNUSDThe national currency has lost 30% of its value against the USD over the last 5 years. Remittances tended to be sent in crypto, to prevent the risk of a loss in savings. As more remittances were converted into cryptocurrencies, the purchase of the local currency decreased, which amplified its fall.
    • Nigeria is rocked by civil unrest. The government cracked down and notably prevented a feminist coalition of 13 women to raise funds. The coalition managed to raise $150,000 nevertheless thanks to cryptocurrencies. That financial power scared the political class.
    • Bitcoin-trading-volume-in-NigeriaThe cryptocurrency volumes kept on growing nevertheless. Trades went underground, aka harder to monitor and less safe. Platforms started to use peer-to-peer approaches or moved abroad. Others started to declare the cryptocurrencies as regular currencies to circumvent the regulations.
  • Criticism of the ban was heavy
    • With a labor force 27.1% unemployed, 28.6% under-employed and very underbanked, eliminating a mean of commerce didn’t go too well with the Nigerians.
    • The Central Bank was accused of collecting greater control.
    • This being said, preventing money laudering is probably one of the reasons why the country introduced its CBDC.


Unlike developed countries, emerging countries have more to benefit from a mode of payment which is available on a cell phone and doesn’t require a bank account.

dangerIn the case of Nigeria, inflation and protests probably were the key reasons for the crypto ban and the later introduction of a CBDC, but no country can afford or will relinquish the control over its currency.

I suspect more countries will follow Nigeria’s path.




References (Navesink International)

References (Public domain)

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Written by Gontran de Quillacq

Gontran de Quillacq is an expert witness and a legal consultant. He is a recognized authority in options, trading, derivatives, structured products, portfolio management, hedge funds, mathematical finance, quantitative investment, strategy research and financial markets in general.

October 31, 2021


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