As part of its economic reform efforts, the International Monetary Fund (IMF) has advised Nigeria to authorize global cryptocurrency exchanges.
A recent report by the IMF highlights Nigeria’s efforts to integrate cryptocurrencies into its financial system as a means to solidify its position in the African cryptocurrency market. The report recommends that global crypto trading platforms should register or obtain licenses in Nigeria and adhere to the same regulatory standards as traditional financial intermediaries.
Furthermore, the report emphasizes the importance of enforcing anti-money laundering and combating the financing of terrorism (AML/CFT) measures on crypto trading platforms and other virtual asset service providers through effective risk-based supervision.
The report identifies discrepancies in Nigeria’s balance of payments, particularly in Net Error and Omissions (NEO), which indicate unrecorded financial transactions. These discrepancies are attributed to various factors, including the increasing use of crypto assets for cross-border transactions, which often bypass traditional banking channels.
While Nigeria’s balance of payments was largely positive in 2020, preliminary data from 2023 suggests that NEOs remain significantly negative, totaling close to $7.5 billion, equivalent to 2% of Nigeria’s GDP.
The IMF suggests that Nigeria could enhance international investment, stabilize financial markets, and improve remittance mechanisms by regulating and licensing cryptocurrency exchanges. This endorsement comes amidst Nigeria’s escalating macroeconomic challenges, including currency instability and inflation. Through licensing exchanges, the IMF aims to leverage cryptocurrencies for smoother and more secure transactions, thereby enhancing Nigeria’s oversight of digital financial movements, reducing illicit financial activities, and mitigating risks like fraud and money laundering.
Nigeria’s Securities and Exchange Commission (SEC) recently proposed regulations to prohibit peer-to-peer (P2P) cryptocurrency exchanges involving the national currency, the naira. The SEC Director General, Emomotimi Agama, cited concerns about potential manipulation of the naira’s exchange rate. However, banning P2P cryptocurrency payments was previously deemed improbable by industry proponents.
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