Nigeria’s Financial Restrictions May Inure Bitcoin

News and Analysis

In accordance with an order by the Central Bank of Nigeria, the country’s citizens will not be able to use their plastic cards abroad.

The prohibition will become effective as of January 1, 2016. It covers not only regular card transactions, but also purchasing any goods or services from foreign retailers on the internet. The reasons for the ban are unclear, though one of Nigerian private banks states that the measure is temporary. However, since the new year, only transactions between two Nigerian parties will be valid.

Some experts associate the bank’s decision with harsh devaluation of the country’s national currency, naira. In its turn, the loss of the currency’s value is caused by fall in oil prices, as oil is the main export items for the country. Notwithstanding any means the regulator undertook to strengthen the currency, there seems to be no improvement in the situation.

One of local banks issued a note for its customers, where it associates the central bank’s move with “limited foreign exchange supply in the financial market”.

As the Nigerian economy gradually founders, its citizens may become interested in moving their assets out of the country. The situation bears some resemblance with that in China. However, China’s restrictions turned out to be not as harsh as those Nigerian, as the government did not prohibit usage of debit and credit cards altogether, but only limited the spending.

Similar to China, where government-imposed restrictions have raised demand for bitcoin, the cryptocurrency might become the only option for Nigerians, who still wish to purchase goods and services abroad, or to effect international transactions. Bitcoin is neither regulated, nor prohibited in Nigeria for now, so the technology is likely to blossom in Africa’s largest economy.

However, whether it ever happens, remains to be seen the next year.

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