Nigeria’s Bitcoin Origin Story And The Ban On Bitcoin

From the Bitcoinist standpoint, Nigeria, Africa's most populous country, is indubitably one of the fastest-growing Bitcoin economies in the world. But it beggars belief that the country’s Bitcoin origin story is largely unknown.

Lagos, Nigeria’s commercial hub, the melting pot for the various ethnic groups that make up the former British West African colony, is where you can pronto glimpse the nation’s broader economic life.

In Lagos, banks, restaurants, hotels, and gas stations are some of the places where the Nigerian Naira, not Bitcoin, is a legal tender. In other words, the current financial climate in Nigeria, as in many countries, is hostile to programmable money such as Bitcoin simply and squarely because there is no law recognizing it.

But to understand the country’s anti-Bitcoin and anti-crypto policy by extension, it is crucial to go back in time to when Bitcoin was first mentioned in the Cable, one of the country’s most widely circulated dailies. Our search for Nigeria's Bitcoin origin begins in an era that has continued to live in infamy.

The Boko Haram Era

Plagued by crippling instability brought upon it by the deadly terrorist organization Boko Haram, Nigeria made international headlines from 2011 to 2021 as one of the most terrorized countries in the world and had a weak economy to contend with.

For over a decade, there was suspicion that some highly placed individuals were funding the terrorist organization and the country’s financial system was a prime suspect in the scheme.

In 2021, a preliminary US investigation threatened to expose Boko Haram sponsors within and outside the country after 12 years of the unimaginable terror unleashed on the nation.

The investigation revealed that the Boko Haram sect had unhindered access to millions of dollars, which enabled terrorism financing to go forward in secrecy. This revelation not only called the country's financial system into question but also put a spotlight on the need for tougher banking regulation and surveillance.

Agitated by the possibility of a criminal gang or even Boko Haram leveraging Bitcoin’s technology to undermine the country’s security, the CBN(Central Bank of Nigeria)had in 2017 issued a circular to banks and other financial institutions stating that :

“cryptocurrencies are largely untraceable and anonymous, and they are vulnerable to abuse by criminals, particularly in money laundering and terrorism financing”.

This move being the earliest attempt to halt the rise of Bitcoin and the horde of cryptocurrencies dotting the crypto landscape in Nigeria is clear evidence of the government's intention to get rid of any ploy or scheme that was capable of undermining the country's security and financial system.

Bitcoin For Ransom

Amid the Boko Haram insurgency in 2019, a Bitcoin for ransom story was reported in the Cable Newspaper and it was about the plight of a Nigerian, Aisha Ardo, who was released by some kidnappers after her father paid a ransom of $15000 in Bitcoin.

Aisha’s story cast Bitcoin in a bad light, and it later set the stage for its proscription in 2021. Like the popular Ulbricht case or the Silk Road affair, which was reminiscent of the early days of Bitcoin, it exposed the potential dangers Bitcoin unwittingly poses to all humanity when Criminals use it to further their objectives.

Fast Forward to 2021

On the 5th of February 2021, the Central Bank of Nigeria placed a ban on crypto and crypto servicing in the Nigerian banking system, mostly citing security risks and the unregulated nature of digital assets.

The ban has several implications. One, the banks and other financial institutions were prohibited from dealing in cryptocurrencies. Two, the accounts of persons dealing in cryptocurrencies are to be reported and frozen with immediate effect. And lastly, Bitcoin and other cryptocurrencies are not legal tenders in private or public.

As it turned, the country’s apex banking regulatory body, the CBN, had ruled out the feasibility of cryptocurrencies in the grand scheme of things and had purportedly acted in the best interest of a troubled country.

The ban was hailed by some analysts as expedient owing to the level of instability that is bedevilling the country. And it is in tandem with the position of Nigeria’s Securities and Exchange Commission, to collaborate with CBN to understudy the identified risks of cryptocurrency.

Bitcoin After The Ban

Notwithstanding the ban, Bitcoin has proven itself to be indestructible. It has remained the highest-traded digital currency in Nigeria and has made her a potential Bitcoin economy. Not only does the country have a growing crypto-savvy population, but it is also transforming into a giant crypto hub in Africa.

Although there is no legislation outrightly banning Bitcoin and other cryptocurrencies in Nigeria, it remains illegal to use them for payment and other designated purposes.