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Navigating the Crypto Regulatory Landscape: Insights and Challenges in Nigeria

ByDayne Lee

Feb 27, 2024

Nathaniel Luz, co-founder and Chief Marketing Officer of Flincap, a local crypto over-the-counter (OTC) platform, is urging the Nigerian government to address the licensing hurdles faced by local exchanges, rather than attributing the country’s forex difficulties to the cryptocurrency ecosystem.

Mixed Signals from the Nigerian Government

The Nigerian government’s stance on cryptocurrency remains ambiguous, with recent actions causing uncertainty within the crypto community. This confusion was heightened following reports from users about their inability to access the websites of major crypto exchanges such as Binance and OctaFX through conventional telecom services on February 21, sparking concerns over a potential government crackdown on crypto platforms.

In a discussion with Cointelegraph, Luz expressed his disappointment with the Nigerian government’s approach towards the crypto sector, criticizing the government for blaming the crypto industry, particularly OTC traders, for the depreciation of the Nigerian naira, which has seen a sharp exchange rate of 1,800 naira to $1, largely attributed to Tether (USDT) trading against the naira in the peer-to-peer (P2P) market.

Misplaced Blame and Economic Realities

Luz contends that the economic challenges and the naira’s depreciation are not the fault of the cryptocurrency sector. He points to a variety of factors contributing to Nigeria’s economic situation, including excessive naira circulation, a shortage of U.S. dollars, heavy import dependence, emigration, currency exchange, and uncertainties surrounding Eurobond payments. These issues, Luz argues, stand apart from the activities within the local crypto industry.

The 2023 Regulatory Shift

In December 2023, the Nigerian government reversed a crypto ban implemented in 2021 by the country’s Securities and Exchange Commission and the Central Bank of Nigeria. This policy change allowed crypto exchanges to seek operational licenses in Nigeria. Despite this progress, many crypto startups struggle to meet the stringent licensing requirements, which include 500 million naira ($340,000) in paid-up capital and a 30 million naira ($20,000) application fee.

Luz suggests that the government should focus on refining the licensing process for local exchanges rather than holding the crypto ecosystem accountable for the nation’s forex issues.

Nigeria’s P2P Market Dominance

Nigeria has emerged as the world’s largest peer-to-peer crypto trading market, a status achieved in the wake of the Central Bank of Nigeria’s 2021 prohibition on financial institutions engaging in crypto transactions.

Overview of Nigeria’s Crypto Regulatory Evolution

DateEventImpact on Crypto Community
February 2021Access issues to crypto exchange websites reportedRaised concerns over potential government restrictions
December 2023Reversal of the 2021 crypto banAllowed exchanges to apply for operational licenses in Nigeria
OngoingStruggles with licensing requirementsChallenges for startups in meeting capital and fee requirements

The ongoing regulatory and economic challenges in Nigeria highlight the complex interplay between the crypto industry and governmental policy. Nathaniel Luz’s insights shed light on the need for clearer regulations and a more supportive stance from the Nigerian government towards the burgeoning cryptocurrency sector. By addressing licensing issues and fostering a more collaborative environment, Nigeria could harness the full potential of its crypto market while addressing broader economic concerns.

Featured image credit: issam via Adobe Stock

Dayne Lee

With a foundation in financial day trading, I transitioned to my current role as an editor, where I prioritize accuracy and reader engagement in our content. I excel in collaborating with writers to ensure top-quality news coverage. This shift from finance to journalism has been both challenging and rewarding, driving my commitment to editorial excellence.