The recent involvement of the Nigerian government in the crypto industry has created ambiguity among various stakeholders within the broader crypto community regarding its position and objectives. Nathaniel Luz, the co-founder and chief marketing officer of Flincap, a homegrown crypto over-the-counter (OTC) exchange, has emphasized the importance of obtaining clear guidance amid the conflicting indications stemming from recent governmental measures.
Nigeria’s crypto regulatory stance raises concerns
Recent reports have surfaced indicating that local crypto users in Nigeria are encountering obstacles in accessing the websites of several crypto exchanges, including Binance and OctaFX, through conventional telecommunication service providers. This occurrence, which occurred on the evening of February 21, has triggered speculations about a potential government ban on crypto platforms. Consequently, this has further compounded the uncertainty surrounding the regulatory landscape in the country.
Nathaniel Luz has weighed in on this matter, suggesting that the Nigerian government’s stance on the crypto industry lacks transparency and may signal an unwillingness to cultivate a constructive relationship with participants in the crypto sphere. Moreover, Luz criticizes the attempt to attribute the current exchange rate of 1,800 naira to $1 solely to OTC traders engaging in USDT for naira transactions on the peer-to-peer market.
In Luz’s view, laying the blame for the depreciation of the naira solely at the feet of OTC traders is misguided. He contends that broader economic challenges are likely the primary drivers behind the currency’s devaluation. Luz points to several factors contributing to the depreciation of the naira, including an excess of naira in circulation, a scarcity of dollars, heavy dependence on imports, currency exchange activities by emigrants, and uncertainties surrounding Eurobond payments. By examining these multifaceted factors, Luz underscores the complexity of Nigeria’s economic situation and cautions against oversimplifying the causes of currency depreciation.
Challenges facing the crypto industry
He underscores that these factors are independent of local crypto trading and significantly contribute to the depreciation of the naira. Despite previous initiatives, such as the lifting of the 2021 crypto ban imposed by the Securities and Exchange Commission (SEC) and the Central Bank of Nigeria (CBN), numerous crypto startups continue to grapple with meeting the requirements for obtaining licenses to operate within Nigeria’s crypto market.
These licensing prerequisites entail a substantial paid-up capital of $340,343 (500 million naira) along with an application fee of $20,420 (30 million naira). Luz advocates that the government’s attention should be directed towards resolving these licensing hurdles rather than attributing foreign exchange-related challenges to the local crypto ecosystem.
Following the Central Bank of Nigeria’s prohibition on institutions from engaging in crypto transactions in 2021, Nigeria has emerged as the largest peer-to-peer (P2P) market for crypto trading worldwide. This ban spurred a transition towards P2P trading, thus bolstering Nigeria’s prominence in the global crypto market. Nevertheless, the Nigerian government’s recent actions and statements concerning the crypto industry have sown uncertainty and bewilderment within the crypto community.
While efforts to regulate the industry are understandable, there exists a pressing need for enhanced clarity and dialogue between the government and stakeholders in the crypto space. By addressing the licensing challenges faced by local exchanges and refraining from unjustly attributing economic difficulties to the crypto industry, Nigeria can take constructive strides towards fostering a more conducive environment for crypto innovation and investment.
