Nigeria moves on blockchain tech, but leaves Crypto in limbo

By Alexander Chiejina

• National Blockchain Policy to promote e-governance

With the overarching goal of institutionalising blockchain technology in the economic and security sectors of Africa’s most populous country, the Nigerian government has established a National Blockchain Policy for the country. 

The Federal Ministry of Communications and Digital Economy (FMoCDE) created a National Digital Economy Policy and Strategy after realising the need to diversify the Nigerian economy. This was supported by eight pillars: development regulation, digital literacy and skills, solid infrastructure, service infrastructure, development and promotion of digital services, soft infrastructure, the digital society and emerging technologies, and the creation and use of indigenous content.

By applying blockchain to promote e-governance in all sectors, the policy aims to encourage the implementation of blockchain technology in government in a way that supports efficiency, transparency, and productivity by ministries, departments, and agencies of the government.

The market for blockchain technology was estimated to be worth $10.02 billion in 2022, and from 2023 to 2030, it is anticipated to increase at a CAGR of 87.7 percent, according to Grand View Research. 

The expansion of venture capital funding for blockchain technology startups is responsible for the market expansion. For instance, blockchain technology supplier, Circle Internet Financial Ltd., revealed in May 2021 that it had secured $440 million in funding from institutional and strategic investors. The company utilised these funds for market expansion and organisational development.

While the need for a national blockchain adoption policy led to the idea, the adoption strategy document is seen as a step that could lend legitimacy to blockchain technology, which is also linked to cryptocurrencies, and the need for the Nigerian government to capitalise on the potentials of blockchain technology for national advancement.

The goal of the policy is to encourage the use of blockchain technology in government in a way that promotes effectiveness, accountability, and productivity by ministries, departments, and government agencies that implement blockchain to support e-governance across all sectors.

Although the idea for a national blockchain adoption policy came from the need for the Nigerian government to capitalise on the benefits of blockchain technology for the country’s advancement, the release of the adoption strategy document is seen as a step that could lend blockchain technology, which is also linked to cryptocurrencies, some legitimacy.

Nadeem Anjarwalla, director, Binance West & East Africa, said although this development is still in its early phases, we (stakeholders) are happy to see it because it will increase the ecosystem’s clarity, trust, and confidence. 

“In the coming decade, we predict that the development of blockchain technology will become a crucial differentiator for national economies and a crucial indicator of global competitiveness for luring FDI, fostering innovation, and generating jobs. The blockchain business in Nigeria has thus reached a crucial milestone,” Anjarwalla said in a recent media interview. 

The Federal Executive Council further directed relevant regulatory authorities to build regulatory instruments for the deployment of Blockchain Technology across various sectors of the economy, according to the statement, which details how the National Blockchain Policy would be put into practice.  Among them are NITDA, the Nigerian Communications Commission (NCC), the Securities and Exchange Commission (SEC), the National Universities Commission (NUC), and the Central Bank of Nigeria (CBN). 

Additionally, NITDA is mandated to oversee the policy’s coordination of actions under the Federal Ministry of Communications and Digital Economy.  A multi-sectoral steering committee has also been authorised to manage the policy’s implementation.

In his reaction, Senator Ihenyen, lead partner at Infusion Lawyers where he directs the blockchain & virtual asset practice, said that the absence of legislative support is one of the biggest obstacles to the policy’s successful implementation. Notably, no legal framework requires any of these regulatory bodies to provide regulatory tools to implement blockchain technology across diverse Nigerian economic sectors. 

The National Information Technology Development Agency Act of 2007 severely restricts NITDA’s ability to instruct or even coordinate key entities to carry out the policy, among other things. The Ministry of Communications and Digital Economy is in the same boat, Ihenyen said.

He pointed out that the implementation of the policy has two main facets, for instance, from the perspective of the CBN. One is good and the other is bad. 

Positively, the introduction of eNaira, a central bank digital currency that uses blockchain technology to enhance—or at least expand—payments, can be regarded to be the CBN’s first step toward implementing a blockchain strategy in Nigeria’s banking and financial system. The CBN’s present anti-cryptocurrency position will negatively assure that blockchain technology use cases involving cryptocurrencies, especially decentralised cryptocurrencies like bitcoin, Ethereum, Litecoin, and others, do not flourish.

Blockchain is useful for business transactions between entities. Permissioned users using distributed ledger technology can access the same data concurrently, enhancing efficiency, fostering trust, and reducing friction. It is noteworthy to state that Nigeria joins countries such as the United Kingdom, Denmark, Switzerland, Estonia, Georgia, Singapore, and the United Arab Emirates in legalising and approving blockchain technology.