The Vice President, Prof. Yemi Osinbajo has asked the Central Bank of Nigeria (CBN) and Securities and Exchange Commission (SEC) to regulate operations of cryptocurrencies and blockchain technologies.
Osinbajo, who spoke on Friday during a one-day special summit on the economy by bank chief executive officers with theme: ‘CBN/ Bankers’ Committee’s Initiative for Economic Growth’, said he fully agreed with the positions of SEC, CBN and other anti-corruption agencies on the dangers of trading in cryptocurrencies but the right thing to do was to regulate their operations.
The CBN had two weeks ago banned banks and other financial institutions from trading on cryptocurrencies or providing banking services to companies involved in the business.
CBN Governor, Godwin Emefiele said decision to prohibit deposit money banks, non-banking institutions and Other Financial Institutions from facilitating trading and dealings in cryptocurrency was in the best interest of Nigerian depositors and the country’s financial system.
Chairman of the Independent Corrupt Practices and Other Related Offences Commission (ICPC), Prof. Bolaji Owasanoye (SAN) said virtual assets and cryptocurrency can be used for terrorism financing and kidnapping. He said cryptocurrency and other virtual means are risky for Nigeria which is grappling with security challenges.
Likewise, Director/CEO, NFIU, Tukur Moddido, kicked strongly against Cryptocurrencies, pointing out that it failed the critical tests of vulnerability and risks. According to Modibbo, the NFIU through its Cyber Intelligence stopped a scam of roughly $3 million recently.
However, Osinbajo said their positions should be the subject of further reflection. “There is a role for regulation here. And it is in the place of our monetary authorities and SEC to provide a robust regulatory rules that address these serious concerns without killing the goose that lay the golden eggs”.
He said some of the exciting and very well articulated developments received from regulatory authorities call for prudence and care in adopting them.
“These are very well articulated by the regulatory authorities. But we must ensure that we are in a position to prevent any of the adverse side effect like criminal act that may arise in the course of adopting any any of these options,” he advised.
Osinbajo disclosed that blockchain technology, digital assets and cryptocurrencies remain very topical issues in global finance.
“First is that there is no question that blockchain technology generally, and cryptocurrencies in particular, will become a challenge for traditional banking in ways that you cannot get to imagine. So, we need to be prepared for that sensitive shift. And sooner or later, remittances can have a challenge too because blockchain technology will provide far cheaper functions to the kind of fees being paid today for cross border transfers to banks,” he said.
Continuing, the Vice President said that traditional switch system is equally facing challenges because there are a whole lot of digital assets formed daily, from Blockchain technology.
“Clearly, the future of money and finance, especially for traditional banking must be exciting as it is frightening. We see in many other sectors, disruptions make for efficiency and profit,” he said.
In his presentation at the event, Emefiele said the theme of the event was appropriate and timely when the unprecedented impact of the COVID-19 pandemic on the global economy and indeed the Nigerian economy in 2020 is taken into account .
Commodity exporting countries like Nigeria also faced significant revenue challenges as commodity prices such as crude oil, dipped by over 65 percent in the first half of the year.
In addition, investors pulled over US$100 billion from emerging market countries in the first half of the year, which resulted in a corresponding depreciation in the currencies of several emerging market countries.
He said Nigeria’s combined stimulus measures so far is about $18 billion, which is close to 4.5 percent of the Gross Domestic Product.
“Contrary to expectations by some analysts that the covid-19 pandemic would lead to a prolonged downturn in the global economy, they did not quite envisage the proactive forcefulness with which policymakers could respond to the crisis. Indeed, the unprecedented amount of stimulus, along with the successful development of several vaccines, and easing of movement restrictions, helped to support a robust and faster-than- expected recovery in the 2nd half of the year,” he said.
He said the agriculture sector was a key driver in taking the Nigerian economy away from negative growth in the 4th quarter of 2020. It is important that we not only sustain measures aimed at increasing productivity of the sector, but also ensure that we continue to produce items that can be produced locally rather than resorting to imports of these items.
The Central bank has never said the closure of border shall be in perpetuity. Yes, the CBN advocated for the closure of borders because of some of the unfortunate incident of smuggling of goods into our economy, that were undermining the growth of our local industries.
He said the CBN will remain at forefront, to fight smugglers in this country. “We will not allow smugglers of goods that are banned or goods produced in the country, to be imported into the country,” he said.
According to Emefiele, the drop in crude oil earnings and associated reduction in foreign portfolio inflows significantly affected the supply of foreign exchange into Nigeria. In order to adjust for the decrease in supply of foreign exchange, the naira depreciated at the official window from N305/$ to N360/$ and now hovers around N410/$.
With the decline in our foreign exchange earnings and subsequent adjustments in the value of the naira vis-à-vis the US dollar, the CBN has continued to implement a demand management framework, which is designed to support improved production of items that can be produced in Nigeria, and further conservation of our external reserves.
He said these measures have helped to prevent a significant decline in our reserves.
“Our external reserves currently stand at over $35 billion and is sufficient to cover more than seven months of import of goods and services, even though the international rule of thumb is for reserves to cover about three months of imports.
He said domestic financial conditions have remained supportive to growth, due to measures being implemented by the CBN. Aggregate domestic credit grew by 17 percent between January and December 2020, highlighting the effects of the CBN’s intervention programs, our LDR policy and accommodative lending rates by the banks.
He said that with the discovery and deployment of vaccines, 2021 will be a year of massive global recovery and Nigeria must not be left out.
In order to drive and sustain this recovery therefore, he said Nigeria needs to sustain the accommodative fiscal and monetary policy measures aimed at improving access to finance to households and businesses. Also, prevent a resurgence in COVID-19 related cases and ensure that a significant number of our population is properly vaccinated.
On remittances, he said the CBN has already taken several measures to increase the flow of diaspora remittances into the country using formal channels. In December 2020, we instructed all international money transfer operators (IMTOs) to provide remitters with the option of sending foreign exchange to beneficiaries in Nigeria. This new measure has helped to reduce the diversion of forex by some IMTOs, who had thrived from forex arbitrage arrangements, rather than on improving transactions volumes to Nigeria.
“Indeed, we have already seen remittances improve from a weekly average of about US$5 million before this policy, to over US$30 million per week. We believe this measure will help to significantly boost inflows of forex and create much more liquidity in that space,” he stated.