The International Monetary Fund (IMF) in a recent report has advised Nigeria to license global cryptocurrency exchanges as part of economic reform measures.

This proposal would help strengthen Nigeria’s position in the African cryptocurrency market and could attract local and international investments.

Need for effective anti-money laundering and terrorist financing policies

According to the IMF, such crypto exchanges must be registered or licensed in Nigeria and subject to the same regulations that apply to financial intermediaries. The report highlights the need for effective anti-money laundering and terrorist financing (AML/CFT) risk-based supervision by these platforms.

The IMF report further explains that there are significant discrepancies in Nigeria’s balance of payments, mainly due to Net Errors and Omissions (NEO), which often include unrecorded financial transactions. These are attributed to the shift towards using crypto assets for cross-border transactions. The NEOs are reportedly still significantly negative, with an estimated value of almost $7.5 billion, or 2% of Nigeria’s GDP.

Improving several things in the country

The adoption of cryptocurrency would not only help stabilize financial markets but could also improve remittance mechanisms for the sizable Nigerian diaspora. This could be essential given the current economic challenges the country faces, such as currency instability and high inflation.

The IMF states that by regulating and licensing cryptocurrency exchanges, Nigeria can effectively use cryptocurrencies as a tool for more stable and efficient transaction processes. This would not only help reduce illicit financial flows, but could also limit the risks of fraud and money laundering associated with cryptocurrency transactions.

Recent changes are already visible

The recent changes in regulations are already visible. The Nigerian SEC has announced that they will be banning Peer-to-Peer (P2P) cryptocurrency exchanges that use the national currency, the naira. The Director of the Nigerian SEC, Emomotimi Agama, said this ban is intended to protect the naira from manipulation and limit the impact on the exchange rate.

This ban on P2P payments is considered nearly impossible by cryptocurrency industry proponents, demonstrating the challenges faced by regulators.


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