Nigerian foreign investment in cryptocurrencies reaches a record low as the nation struggles to attract significant amounts of foreign capital despite the exponential development in the use of cryptocurrencies there.
The severe lack of dollars caused a 33% decline in foreign direct investment (FDI) in Nigeria in 2022, according to the National Bureau of Statistics (NBS). The lack of data, which caused FDI to plummet from $698 million recorded the year before to $468 million, is indicated by the data.
The numbers also show that FDI has decreased by about 90% since reaching a peak of $4.7 billion in 2008. The country has a very active crypto community, and many people there are more likely to retain their money in cryptocurrencies than in fiat money, which is a bullish development for cryptocurrencies.
This is popular because the naira keeps losing value. In Chainalysis’ 2020 Cryptocurrency Geography Report, Nigeria’s rate of adopting and using cryptocurrencies was ranked seventh. Due to the rate of adoption, foreign crypto investments should have grown, but they didn’t.
Nigeria’s low foreign investment rate may be attributed to cryptocurrency’s limited uptake, according to local data analyst and crypto enthusiast Obinna Uzoije. The lack of bitcoin use in daily economic activities and the ban on financial institutions servicing crypto exchanges accounted for the low investment rate, according to Uzoije.
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Crypto Ban in Nigeria
All banks were ordered by the CBN to stop dealing with cryptocurrency-related firms. The CBN ordered banks to terminate the accounts of Bitcoin traders.
This circular was issued to deposit money banks (DMBs), non-bank financial institutions (NBFIs), and other financial institutions on February 5, 2021, by the Directors, Banking Supervision and Payments System Management, Bello Hassan and Musa Jimoh (OFIs).
The bank prevented regulated institutions from trading in or processing cryptocurrency exchanges. DMBs, NBFIs, and OFIs were required to discover and shut down cryptocurrency exchange operators and trading accounts. CBN advised local banks to avoid crypto transactions and exchange payments.
According to CBN, bitcoin, litecoin, and others are used for terrorism financing and money laundering. In 2017, the CBN required banks and other financial institutions to take the following actions pending substantive regulation or determination.
Banks prohibited virtual money ownership, trade, and transactions. Virtual currency exchanger customers’ identities, verification, and transfer tracking need AML/CFT controls. Due to legal uncertainty, the CBN advised bitcoin investors to invest at their own risk in February 2018. CBN forbids crypto trade and payments.
The tenacity of Nigerian cryptocurrency users
Nigeria bans cryptocurrencies, but Nigerians have always preferred digital currencies to fiat cash. In the 2020 Cryptocurrency Geography Report by Chainanalysis, Nigeria was ranked eighth among the 154 countries studied for the rate of adoption and use of cryptocurrencies.
According to NBS data, Nigerian crypto users need to do more to attract overseas investment. Nigerians “love” crypto, fintech, and entertainment, but no state has encouraged foreign investment in those sectors, according to certified investment trader Olumide Adesina. According to Adesina, building a tech and crypto community in Lagos like Silicon Valley will produce thousands of direct jobs.
Lagos State Governor Babajide Sanwo-Olu suggested crypto adoption, according to the local press. A cryptocurrency sandbox regulatory framework, a crypto-focused innovation hub, and incentives for bitcoin-accepting businesses are among these proposals.