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On 3 November, Nigeria's Central Bank issued a Post-No-Debit circular to the banks, instructing them to close the accounts of named bank customers and place their funds in suspense accounts for engaging in cryptocurrency trading.

On Tuesday 9 November, Williams woke up to despairing news. His bank account had been closed for “benefiting from crypto transactions”. According to the message received, his bank had received a “mandate from the Central Bank of Nigeria (CBN) to close down all accounts engaging in crypto”.

He was advised to visit the branch of the bank in which he opened an account to retrieve his funds. Unfortunately, Williams works as an expatriate in Ghana and he will have to wait till his return to Nigeria to collect his money from the bank.

Six days before, on 3 November, Nigeria’s Central Bank had issued a Post-No-Debit circular to the banks, instructing them to close the accounts of named bank customers and place their funds in suspense accounts for engaging in cryptocurrency trading, in contravention of CBN Circular BSD/DIR/PUB/014/001 dated 5 February 2021.

Curiously, the referenced circular does not prohibit trading in cryptocurrency. According to the CBN in its press statement released on 7 February 2021, the 5 February circular did not place any new ban on cryptocurrencies. It merely reiterated the contents of an older circular, released in 2017, which warned banks not to deal in cryptocurrency and to ensure that existing customers who are virtual currency exchangers have effective AML/CFT controls that enable them to comply with KYC and transaction monitoring requirements.

It seems like quite a leap from this circular to the post-no-debit circular requesting banks to close customers’ accounts for engaging in cryptocurrency trading. In defending its stance against cryptocurrency, the CBN cited the CBN Act, 2007 which prohibits the use of any other legal tender within Nigeria. However, the purchase of cryptocurrency does not translate into its use as legal tender in Nigeria. It is as much a currency as pounds sterling and dollars, both of which are often purchased by Nigerians to hedge against their unstable currency but are not used as legal tender within the country.

Following the CBN’s cue other Nigerian banks like FCMB, have issued instructions to their nationwide network of branches to flag bank accounts of 18 – 30-year-old customers with high volume transactions for closure. Yet another giant leap.

These actions of FCMB are the newest in a set of moves by the nation’s banking system, seemingly designed to prevent Nigerians from owning cryptocurrency, without expressly stating it. Other banks, such as GTB and Kuda bank, have already followed suit, leading to a wave of laments through the Nigerian cryptocurrency ecosystem.

Implications of this expulsion

Cryptocurrency has provided hope to a new generation of Nigerians and a steady source of income in a country where average incomes have been declining for six years straight and the fiat currency continues to lose value. In 2020, cryptocurrency transactions worth more than $400m were generated in Nigeria, with the country ranking third on the planet in terms of highest bitcoin trading volume. This figure is still on the rise as cryptocurrency transactions saw a year-on-year increase of 25% in June, 2021.

A Twitter user who wishes to remain anonymous explained that she sold all her stocks in Nigerian companies at a loss, after four years of investment, and then she purchased SHIB which yielded enough returns to enable her buy nine other shit coins. “But what happens if P2P is no longer an option,” she asks, “is this the end?”

By targeting these cryptocurrency traders and pushing them out of the banking system, Nigeria is effectively exposing them to more risk as they seek new ways to participate in this global market that offers unprecedented returns and relative currency stability.

“Sourcing out a P2P seller or buyer is going to be a herculean task now. Worse is people will try to use other informal P2P method of carrying out the transaction. While it’s not any different from P2P on Binance and other exchanges, it’s definitely less safe,” a cryptocurrency trader lamented.

Various hashtags, ranging from #NigeriaCryptoDay to #BoycottFCMB, have popped up on social media as young Nigerians brainstorm on how to bypass this new hurdle.

Similar to how P2P was used to bypass the ban on purchase of cryptocurrency following the February 2021 circular, options like bitcoin vouchers and using informal P2P forums are being considered as alternatives to centralised P2P trading, while some users urge cryptocurrency enthusiasts to avoid the banking system and integrate their coins more fully into their daily transactions, using applications like AbitPay. Nigerians had already begun using stablecoins as an alternative savings tool in a bid to hedge against currency devaluations. The latest in the series of actions against their naira bank accounts has only accelerated the move from naira savings accounts to crypto wallets.

“My plan is to do what I did during their first attack—hold my savings in stablecoins and allow the market absorb the pressure. But I’m not worried. As long as people can still do transactions with their bank accounts, crypto will always work in Nigeria,” Dozie, a Nigerian cryptocurrency trader stated.

In a time when banks are faced with an unprecedented liquidity crunch due to the CBN’s policies and are forced to issue fixed deposits and bank placements at rates that far supersede the T-bills rates, can Nigeria’s banks withstand the effects of a possible boycott?

Yinka, an investment research Analyst in Nigeria, believes that they can: “Most of these young people are retail customers. Of course, if they withdraw too much from the banking system, it will be a problem. But so far, a transaction on $10,000 will most likely still go through even if 25 young people have withdrawn their funds. The thing is, there is still a lot of trust in the traditional banking among the older ones. At least for now. So, if the young ones are moving out to more convenient banking systems, its effect on liquidity will not be very significant yet. Because the older ones are those with the real big money.”

The legal implications of the CBN’s latest move also bear talking about. By victimising cryptocurrency traders and attempting to freeze them out of the banking system, the CBN is punishing the traders for an offence that does not exist, an action that is blatantly illegal. In addition, FCMB’s discrimination on the basis of age could be construed as a violation of the fundamental human rights which are enshrined in the Nigerian constitution. Only last month, a Federal High Court sitting in Abuja declared the CBN’s attempt to freeze the bank accounts of cryptocurrency traders illegal. It stands to reason that a similar decision would be made in this situation.

In March 2021, just after the CBN banned the purchase of cryptocurrency through bank accounts, the dollar volume of cryptocurrencies sent from Nigeria rose to $132m, up 17% from the previous month. Nigerian youths are known for their resilience in the face of hostile policies and unfriendly law enforcement. For them, this is just another hurdle to overcome.