With its latest national blockchain policy, Nigeria seems to be going big on blockchain technology. But the West African nation does not seem to be welcoming crypto anytime soon—blockchain policy or not.
On May 3rd, the Federal Ministry of Communications and Digital Economy (FMCDE) announced the approval of a national blockchain policy. Essentially, this means that the government is throwing its weight behind an emerging technology which it hopes can “facilitate the development of the Nigerian digital economy and enable citizens to have more confidence in digital platforms.”
The move was lauded as game-changing and reflective of the government’s pro-technology position. However, several industry watchers are raising questions concerning implementation and asking a critical question: why is crypto still banned by a pro-blockchain government?
Blockchain is an advanced technology that uses database mechanisms to record transactions in a decentralised public ledger. Advocates of blockchain describe it as a next-generation technology that can be applied to optimise every facet of human life, ranging from financial services and healthcare to supply chain and identity management. According to research firm Gartner, the business value added by blockchain will increase to over $3 trillion by 2030—a pie the Nigerian government is now hoping to plug the economy into.
Crypto is still not welcome
For the Nigerian government, approving a national blockchain policy does not amount to accepting cryptocurrency (which remains the most prominent use case of the blockchain). In July 2021, the CBN banned banks from facilitating crypto transactions and asked that banks “close accounts of persons or entities involved in cryptocurrency transactions.” The bank cited terrorism financing and money laundering as its key reasons for the action, maintaining that it was protecting Nigerians from the risks of crypto adoption.
Meanwhile, the national blockchain policy draft reveals that the Nigerian government is still crypto-averse as it seeks to develop a regulatory framework for other use cases of the blockchain. “Blockchain technology undoubtedly holds great potential for the development of Nigeria’s digital economy. A lot of the focus has been on cryptocurrencies, especially bitcoin. However there is a lot more that blockchain can do for the economy and this strategy document aims to redirect the focus to other areas,” the draft reads in part.
Christian Duffus, founder and CEO of blockchain startup Fonbnk, explained to TechCabal that the blockchain policy may be a reactionary measure by the government to send out a clear signal that it is not broadly against blockchain technologies, especially after the publicity of its ban on crypto. “The blockchain policy is an important move by the government to accommodate blockchain innovation in the country. After the ban on crypto, they can’t afford to be seen as a government that associates illegality with blockchain operators. Interestingly, this policy also provides a framework for eNaira, the blockchain-powered digital currency released by the CBN,” he said.
Oluwatobiloba Ajayi, blockchain expert and founder of B2B crypto startup Ivory Pay, remains unruffled by the exclusion of crypto from the national blockchain policy. “Crypto significantly takes control and oversight of finances off the government’s watch. And they don’t want that, so I’m not sure this policy will help crypto,” he said on a call with TechCabal.
How does the blockchain policy help?
According to the FMCDE, the overarching goal of the policy is to create a blockchain-powered economy that supports secure transactions, data sharing, and value exchange between people, businesses, and government. The policy practically serves as a government-led approach to the adoption of blockchain technology in Nigeria. While the next steps in the implementation process remain unclear, the fact remains that through this policy, the Nigerian government is announcing itself as a collaborator for blockchain-related innovation in the country.
Nnamdi Uba, the CEO of HouseAfrica, a startup that leverages blockchain to solve land title ownership in Africa, spoke to TechCabal effusively about the national blockchain policy. “I am one of the people that have been working on that policy project for the past three years,” he revealed. “We want to unlock the power of blockchain in our national economy through a government-led approach. The goal is to entrench the use of blockchain in government processes, then roll it out to the masses.”
“However, we must realise that blockchain does not start and end with crypto. My real estate company, for example, is blockchain-powered, yet we don’t use crypto. Blockchain can help in many ways, including the tokenisation of properties, supply chain tracking, and authentication of documents. We will also see more interesting use cases come up in the future. As you know, the incoming administration has also promised to focus on blockchain technology,” he shared.
Some initiatives outlined in the policy’s strategy framework include the promotion of blockchain business incentives programmes and the establishment of a national blockchain sandbox for proof of concepts and pilot implementation. These ambitions by the government convey a friendly regulatory framework for blockchain startups in the country.
“Historically, we have seen government policies work against tech startups—as the case was in Lagos’ ban on ride-hailing. This is one time we are seeing the government roll out a policy that incentivises builders and investors in this niche, It’s a big deal, but for it to work, the government must be at the forefront. They must drive its implementation and integrate the technology into their own systems,” Ajayi said.
