Debayo Sulaimon, 23, was preparing for the day when officials from the Nigerian Police Force entered his property in the southern town of Ilorin and arrested him and his roommate. Sulaimon’s offence, police told him as they carried him away that October morning, was trading cryptocurrencies, which he had begun doing a month before the Central Bank of Nigeria (CBN) increased its efforts to prohibit the practise in February.
Sulaimon and his roommate were released after spending five hours at a local police station and paying a 120,000 naira ($290) bond. They then returned to buying and selling digital currency. “There was no employment available, and there was nothing to do. We had to look for (other) places to eat. I trade bitcoin for a living, not as a side hustle “he explained to the Thomson Reuters Foundation.
Nigeria has joined a growing list of countries, including China, Russia, and Turkey, that have tightened or prohibited trading in bitcoin and other volatile digital currencies, citing concerns that cryptocurrencies could be used for money laundering, terrorism financing, and other illegal activities. However, traders and crypto experts say the restriction has merely pushed the business underground, with Nigerians trading between themselves using mobile messaging applications and established but unregulated platforms such as Binance and Paxful, leaving them vulnerable to hefty fees and frauds.
“The ban has been ineffective,” said Kunbi Ademola, a lawyer focused on the tech industry, now based in Britain. “But it has exposed a lot more young people to fraud … (peer-to-peer) is not as secure as the direct exchanges that you could do before on the cryptocurrency exchanges.”
The current prohibition, which reinforces restrictions in place since 2017, requires all Nigerian banks and financial institutions to close the accounts of any consumer or organisation trading cryptocurrency or operating local exchanges. The action makes it nearly hard to deposit or withdraw cryptocurrencies, thereby hurting the exchange platforms used by traders to buy and sell the currency.
Nigeria also became the first African country to launch its digital currency, the eNaira, last month, in a move that some crypto experts and users feel is intended to discourage the usage of bitcoin. “I do not consider eNaira to be a cryptocurrency or an e-currency,” stated Enoch Daniels, a Nigerian cryptocurrency trader.
“eNaira still carries the aim of centralized finance, where what you can own is measured and limited,” he added. The CBN did not respond to several requests for comment.
BREAKING THE LAW According to research firm Statista, Nigerians transacted $400 million in cryptocurrency last year, trailing only the United States and Russia in terms of volume.
For young Nigerians like Sulaimon, cryptocurrency provides a source of money and opportunity in the midst of a collapsing economy, surging inflation, and more than 30% unemployment. “Young Nigerians would prefer to invest and transact with cryptocurrencies that are less controlled than the naira, which has rigorous laws,” said Patrick, a bank employee who declined to disclose his last name owing to his employer’s limitations on speaking to the press.
While trading without financial protections is risky, it can also be rewarding, he said, noting that some cryptocurrencies can enjoy returns of up to 150,000 percent, making traders into millionaires in the United States. The new limits have had no effect on the popularity of cryptocurrency in Africa’s most populous country.
According to analytics firm Chainalysis, the dollar volume of cryptocurrencies shipped from Nigeria surged to $132 million in March 2021, up 17 percent from the previous month, immediately following the central bank’s pronouncement. Transactions increased by 25% in June compared to the same month previous year.
Traders claim that the restriction has resulted in an increase in police harassment and extortion of young people, who have been arrested under the new rule and asked for bribes to be released. “To the best of my knowledge, we have not received any official complaints on the alleged extortion of young people over cryptocurrency issues in Ilorin,” said Okasanmi Ajayi, spokesperson for the Kwara State Police.
“The cops would rather arrest and prosecute (people) than make it into a money-making venture,” he explained. According to merchants, the government’s move has also opened the door to scammers who perceive Nigeria’s fast-growing, unregulated crypto market as an easy payday.