- After labelling cryptocurrency as a tool used by criminals to fund their activities, the Central Bank of Nigeria said it will deploy its own digital coin by the year's end
- The financial regulator's decision to compete against bitcoin and other cryptocurrencies has driven a wedge between crypto investors within the country
- One digital currency investor sees the CBN initiative as a solution to high-interest rates, among other benefits, another believes NIGCOIN is dead on arrival due to obvious reasons
Nigerian cryptocurrency traders are divided over the recent announcement by the Central Bank of Nigeria (CBN) to launch its digital currency (NIGCOIN) five months after declaring cryptocurrency illegal.
In a bid to compete or drown the emergence of unregulated cryptocurrency within the country, the financial regulator said by the end of this year, Nigerians will have access to their own electronic coins.
It will be used in the same manner the country's official tender, naira, is being utilised for goods and services. A squad [consisting of government and private stakeholders] will be put together by the apex bank to actualise the 2021 goal which came as a surprise to many, including cryptocurrency insiders.
There's a problem with CBN's digital coin
Individuals and Institutional investors have been cashing in on cryptocurrency as a store of value or hedge against inflation without paying financial tribute to their residential government.
The essence of a digital currency is its decentralised form, which means its activities is not being regulated by an authority [unlike the CBN's] - even though it's volatile to currency influencers like Tesla founder, Elon Musk, Chinese and the United States governments.
As of 2020, Nigerian crypto holders have grown to 1.5 million on Paxful, a digital currency exchange, while they have traded about $1.5 billion on the platform - this figure excludes other popular exchanges like Binance, Coinbase and a local buy and sell platforms.
Crypto investors divided over CBN's NIGCOIN
Nigeria's central bank is looking to tap into the community before it loses control of financial activities within the country. The first step was to slow crypto's growth within the country by disconnecting Nigerians from their exchange plugs in February 2021.
Five months later, the central bank announced its preparedness to pump the local market with a government-backed alternative as access to unregulated cryptocurrency becomes increasingly difficult.
Although most cryptocurrency investors unanimously criticised the clampdown on exchanges, they are singing different songs on the CBN initiative in a chat with Legit.ng.
CBN's NIGCOIN to help with interest rates, naira cost
IT-expert, Chimauche Njoku, said the introduction of the digital coin will contribute to reduction in interest rates considering it will create options for new monetary policy tools:
"Digital currency also called digital cash is next big thing, not just for Nigeria, but globally, Digital currency is an electonic version of notes and coins controlled by a country's central bank.
"There are a couple of benefits issuing digital cash, First, it creates options for new monetary policy tools to be used, which could be lowered interest rates."
Njoku, with experience in financial services, explained that it will create competition in the payments system within Nigeria and cut down the cost of fiat [naira] production yearly:
"Second, it enables competition and provides room for competition in payments systems, we would see new forms of payment system span out from digital cash, third, it will gradually phase out physical cash, there by reducing the rate and save resources used in printing cash yearly."
Freedom outweighs NIGCOIN's benefits
However, web developer, Oluwaseun Shotonwa, said the essence of cryptocurrency is to afford investors control over their money, limiting government's influence on how individuals or company use their funds.
Shotonwa stated that having a government-controlled digital coin wouldn't build confidence in crypto investors, as many prefer the anonymity that comes with cryptocurrency, and devoid of tracking.
He told Legit.ng that:
"One of the key to success of crypto is that people can actual transact without people knowing who the person is... and if the Nigerian government is trying to do that, there's no way they will do it to be like bitcoin or other cryptocurrencies.
"In the sense that Nigerian government has NIN, they have BVN, they have all these connected, and I don't think they would want to do it [to be like bitcoin].
Shotonwa said he wouldn't be investing his cash into the CBN-backed digital currency even though he doesn't have any illegal agenda, as nobody would want to neglect the freedom that cryptocurrency gives.
Nigerian government shot itself on the foot?
He defended his reason with CBN's clampdown on bank accounts during the EndSARS protest in October 2020, and the directive to commercial banks and other financial institutions to close crypto-linked accounts.
The digital marketing expert said if people are not given the liberty enjoyed from Bitcoin, Ethereum, Binance coin, Dogecoin and others, investors will not be willing to invest in the NIGCOIN.
Twitter is one of the biggest backer of cryptocurrency, as the social media platform is used by crypto investors to track activities in their community.
The microblogging site is currently down in Nigeria due to a government ban on its operations, but citizens are bypassing the restriction with VPN.
The networking app is the biggest promoter or best marketing space for digital money, and it's saturated with cryptocurrency investors that believe in anonymity. Shotonwa believes that the CBN will have a hard time flipping the status quo with a government-backed vital coin.
"The idea [that] the Nigerian government [which] banned bitcoin or entire cryptocurrency in their own territory now [want] to create [its] own crypto [makes NIGCOIN] dead on arrival.
"And on the other hand, the social media that pulls more people to crypto is Twitter. How do they [government] intend to market it, how do they intend to gain awareness?"
He said the kind of crowd that does crypto is against the CBN's digital coin, and only Otedola and Dangote will be available for investment in NIGCOIN.
Meanwhile, Legit.ng had previously reported that some Nigerian businesses have been significantly impacted by the ban on Twitter operation within the country.
Nigeria has lost about N388.77 billion in the last eight days since the ban was announced two weeks ago by Minister of Information and Communications, Lai Mohammed.
Businesses affected are media organisations, artisans, and more that can't monetise the social media platform as they use to before the restriction took effect.