THE EFFECT OF CBN CRYPTOCURRENCY BAN ON THE ECONOMY OF NIGERIA

ABSTRACT
This study was carried out to examine the effect of CBN cryptocurrency ban on the economy of Nigeria. To achieve these 4 research questions were formulated. The survey design was adopted and the simple random sampling techniques were employed in this study. In determining the sample size, the researcher purposively selected 104 respondents while 100 respondents were validated. Respondents for the study were obtained from the staffs of four selected banks in Abuja, FCT of Nigeria. Self-constructed and validated questionnaire was used for data collection. The collected and validated questionnaires were analyzed using frequency tables and percentage. The result of the findings reveals that; cryptocurrency has contributed immensely to the growth of Nigeria economy and its impacts are remarkable. among the impacts include; enhanced investment flows, created employment opportunities, encouraged the establishment and growth of financial businesses/companies and also reduced poverty, the ban of cryptocurrency transactions in Nigeria has notable implications and effect on the economy of the country which comprises of unstable investment flows, shadow economy, capital flight and poverty and unemployment, the consequences suffered by the Nigerian masses as a result of the ban on cryptocurrencies among many others include; financial hardship, business bankruptcy and loss of potential employment opportunity. And the extent to which the ban of Crypto transactions affect the Nigeria economy is high. Based on the findings, the researcher recommended that having known the huge economic impact made by the availability and trade of cryptocurrencies in Nigeria and the world at large, it seems not right to impose a ban on it due to the economic implications. Therefore, the CBN should lift the ban and build a strict regulations on the use and trading of Cryptos in Nigeria, by this means, many Nigerian investors both the huge and small will bounce back to their financial position and so many others who has been jobless will successfully secure a source of income. This will in turn reduce the pressure of Unemployment in Nigeria.
 
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
The global financial system is no doubt embracing the current transition from physical currency to almost virtual currencies through the medium of technology. This wave has ushered in the birth of crypto currencies. Crypto-currency has been defined as a digital record-keeping device that uses balances to keep track of the obligations from trading and that is publicly known to all traders. Some of the forms of crypto currencies include Bitcoin (BTC), Litecoin (LTC), Ethereum (ETH), Ripple (XRP), Bitcoin Cash, Neo, Iota, Dash, Qtum, Monero and Ethereum Classic. A cryptocurrency system is defined by two parameters: money growth rate µ ≥ 0 and transaction fee charge at a rate τ ≥ 0. Since the creation of Bitcoin in 2009, numerous private cryptocurrencies have been introduced. Since the advent of cryptocurrency, it has been getting a lot of media attention, and its total market value has reached 128.78 billion USD in 2019. It operates based on a technology called ‘’Blockchain’’.
According to Nakamoto (2008), cryptocurrency is a peer-to-peer Electronic Cash System. The peer-to-peer system of cryptocurrency is built on blockchain, thus, allowing transactions to take place between users directly, without any intermediary (Hameed & Farooq 2016; Grech, & Camilleri, 2017). It allows anonymous transaction between parties and as such, parties do not know the true identity of each other (Dierksmeier & Seele, 2016). This may be necessary because, the entire details of the transaction of every participant on the cryptocurrency blockchain is publicly revealed to other users (Bech & Garratt, 2017). Unlike the traditional currency which is issued at interval determinable by the Central Bank of each country, cryptocurrency like bitcion are mined at a fixed issuance algorithm such that the number of Bitcoins to be mined is halved every year.
Despite the risks associated with this currency, the rate of its growth is astonishingly benevolence and challenging. With its growth, Governments are thrown into dilemma. However the overwhelming benefits of cryptocurrencies has at as when accessible serve as an employment and financial opportunity for the employed and unemployed individuals. As it enables them to meet their individual financial needs at ease More also, the presence of companies who deals with cryptocurrencies in developing countries as Nigeria creates more job opportunity for its citizens, as job opportunities are open for the unemployed citizens. These massive benefits has to an extent made impressing contribute to Nigeria economy.
Nigeria, the hub of West Africa’s economy has remained stagnant over decades, It was later confirmed by the Central Bank of Nigeria (CBN) Governor, Godwin Emefiele and the Minister of Finance, Kemi Adeosun that Nigeria’s economy was officially declared to be in a technical recession based on the new trend figures released. Unarguably, the state of Nigeria economy has disappointed the expectations of its citizens. As unemployment rate never drops to a noteworthy point, inflation and currency devaluation became a daily scenario in the economy (jaboen 2016). This devastated position of the economy has at all times placed a challenge to the citizens as they seek palatable and unpalatable opportunities to achieve daily survival.
However the evolution of cryptocurrencies has offered more than just survival opportunity to the poor masses. Majority of Nigerians took advantage of this flabbergasting platform to over up the lapse or gaps created by poor economy. Irrespective of all these as narrated above, the Nigeria Government unprecedentedly placed a ban on the use and trading of cryptocurrencies in its economy (nation) as announced on the 5th of February 2021. this unpalatable and extemporaneous executions however has left a certain effect, impression, and perception on the citizens. Thus, this study seeks to identify, investigate, and analyse the effect of CBN cryptocurrency ban on the economy of Nigeria.
1.2 STATEMENT OF PROBLEM
According to Aderonke Alex-Adedipe et al (2021), Nigeria has the second largest cryptocurrencies market among other countries. Nigerians for an instance in the last 5 years traded over $500 million worth of cryptocurrencies. However the central Bank of Nigeria released a ban on the trading of Crypto in Nigeria, as it instructed all commercial banks and other financial institutions to identify individuals who transact in cryptocurrencies and close down their accounts. In the recent times, this have been the situation and challenge faced by the masses in Nigeria as many lost access to their accounts, others lost their jobs hence adding to unemployment rate, while several others who depend on crypto transactions to meet daily needs are left helpless (Pecarb 2021). The Execution of certain drastic and unregorous national decision has the ability to build, improve, and destroy the economy of developed and undeveloped countries as whatever that affects citizens’ finance will reciprocally affect the economy (Zeback 1996). Thus, this study seeks to examine the effect of cryptocurrencies ban on Nigeria Economy.
1.3 PURPOSE OF THE STUDY
The study majorly investigates the effect of cryptocurrencies ban on Nigeria Economy. Other discrete objectives include;
1. Examine the impact of cryptocurrencies on Nigeria Economy.
2. Identify the consequences suffered by the Nigerian masses as a result of the ban on cryptocurrencies.
3. Find out the extent to which this drastic execution affect the Nigeria Economy.
1.4 RESEARCH QUESTION
1. What is the impact of cryptocurrency on Nigeria economy?
2. What is the resultant effect of the ban of cryptocurrency transactions in Nigeria on the economy of the country?
3. What are the consequences suffered by the Nigerian masses as a result of the ban on cryptocurrencies?
4. To what extent does the ban on Crypto transactions affect the Nigeria economy?
 
1.5 SIGNIFICANCE OF THE STUDY
The findings on this study will of immense relevance the Government body of CBN and the Nigeria Government entire on the resultant effect such drastic action against cryptocurrencies transactions. This study also well serve a source of information about cryptocurrencies and the economic befits of the virtual currency. However this study will also serve as a source material for anyone who intents or carries out any study related to cryptocurrencies.
1.6 SCOPE OF THE STUDY
This study covers the effect of cryptocurrencies ban by CBN on Nigeria economy using four selected commercial banks in Abuja as a case study.
1.7 LIMITATION OF STUDY
Financial constraint– Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview).
Time constraint – The researcher will simultaneously engage in this study with other academic work. This consequently will cut down on the time devoted for the research work.
However in the midst above mentioned limitation the researcher devotedly ensured that the purpose of the study was actualized.
1.8 DEFINITION OF TERMS
Cryptocurrency: this is a digital currency that can be used to buy goods and services, but uses an online ledger with strong cryptography to secure online transactions.
Economy: this is an area of the production, distribution and trade, as well as consumption of goods and services by different agents. In general, it is defined 'as a social domain that emphasize the practices, discourses, and material expressions associated with the production, use, and management of resources'.
CBN: The Central Bank of Nigeria (CBN) is the central bank and apex monetary authority of Nigeria established by the CBN Act of 1958 and commenced operations on July 1, 1959
Government: the political direction and control exercised over the actions of the members, citizens, or inhabitants of communities, societies, and states; direction of the affairs of a state, community, etc.
 
CHAPTER TWO
LITERATURE REVIEW
INTRODUCTION
Our focus in this chapter is to critically examine relevant literature that would assist in explaining the research problem and furthermore recognize the efforts of scholars who had previously contributed immensely to similar research. The chapter intends to deepen the understanding of the study and close the perceived gaps.
Precisely, the chapter will be considered in two sub-headings:
 Conceptual Framework
 Theoretical Framework
 Chapter Summary
2.1 CONCEPTUAL FRAMEWORK
CRYPTOCURRENCY
The year of 2007 set a new rhythm when it comes to the financial sector and how much people were willing to trust the system. After the crisis, many people who had lost everything, or almost everything, had to turn the page and look for new possibilities. The end of the last decade opened the door for new opportunities, and cryptocurrencies were right around the corner when it happened, which led to a great opportunity for many people who wanted to invest their money on something totally different and with a good growth margin. “In the 19th century, you could find a dollar coin made of silver and a paper dollar that in those days could be exchanged for the same silver coin. More than 100 years ago paper dollar bills were backed by silver, a precious metal that theoretically should always have value. However, today that has changed, a modern dollar bill is backed by nothing but the word of the U.S. government.” (Rose, 2015: 617). Nowadays, cryptocurrencies are a daily topic. But what are exactly cryptocurrencies? The first thing we need to understand is how to settle the difference between a virtual currency, a digital currency and a cryptocurrency, because these are often used interchangeably. The European Central Bank released an article about “Virtual Currency Schemes” in October 2012, where virtual currency was defined as a” type of unregulated, digital money, which is issued and usually controlled by its developers, and used and accepted among members of a specific virtual community”. A digital currency can be defined as a form of virtual currency that is electronically created and stored. A digital currency can or cannot be a cryptocurrency. And last, a “cryptocurrency can be defined as a subset of digital currencies, however, it uses cryptography for security so this makes it extremely difficult to counterfeit” (Gilpin, 2014).
When referring to cryptocurrencies, it is precisely all about a certain type of virtual currencies. Rogojanu and Badea (2015) stated that “virtual currency continues to maintain the main features of a traditional currency, in other words, virtual money is a symbol or synonym for a value, a payment system technology which continued to grow over the past 20 years”. However, due the newness of this phenomenon and its rapid growth, suggesting a universal definition of cryptocurrency is still a challenge. Abboushi (2016), from Duquesne University tries to explain it according to four core dimensions: (1) virtual currency is a form of digital currency which is digital representation and measurement of economic value for an object or transaction; (2) it is issued by non-government party and remitted for the exclusive use by another private party; (3) it is denominated in units of account of its own system that may or may not be exchangeable to real currency; (4) it is used as a medium of exchange similar to real currencies but does not have legal tender status in any jurisdiction in the world. Sauer (2016), describes cryptocurrency as money which does not exist in reality as coins, banknotes or bank deposits, but rather exists in digital form. The author also makes clear that cryptocurrencies are not e-commerce or e-payment systems or other ways of transferring money such as credit card systems or online banking. According to Sauer (2016), the first cryptocurrencies, or virtual currencies, were first seen in online gaming where it could be used to buy new equipment or characters. With time, the online gaming operators began to exchange their virtual currency for real money. The problem was that this market didn’t work both ways, it was a one-way market as the players were unable to swap the virtual currency into real money. In 2015, Edward V. Murphy, a specialist in Financial Economics published an article with questions and answers about cryptocurrencies to allow everyone to understand what was this new emerging market. According to him, “a cryptocurrency is a medium of exchange such as the US dollar” (Murphy, Murphy and Seitzinger; 2015: 1). Later in the same article, Edward clarifies that “like the US dollar, cryptocurrency has no intrinsic value and that it is not redeemable for another commodity, such as gold. Unlike the US dollar, however, cryptocurrency has no physical form, is not legal tender, and is not currently backed by any government or legal identity. In addition, its supply is not determined by a central bank and the network is completely decentralized, with all transactions performed by the users of the system” (Murphy, Murphy and Seitzinger; 2015: 2). “Cryptocurrency is based on the idea of exchanging value without the approval of an institution” (Maftei, 2014: 55). While being aware of a broad developments of various payment mechanisms and creation of alternative currencies, the bold question of what cryptocurrency is should be answered. Legislative acts of United States explain cryptocurrency to be a medium of exchange that operates like a currency in some environments, but does not have all the attributes of real currency, which points the absence of legal tender status in any jurisdiction. So, cryptocurrencies can be described as a digital asset with the intention to function as a medium of exchange, based in the concept of cryptography, which refers to “techniques for secure communication in the presence of third parties called adversaries.” (Rivest and Ronald, 1990).

    Date: 2026-08-12 00:00:00.000000