Nigeria’s Central Bank Calls For Digital Currency Regulation To Stop Illicit Trade

Nigerian news outlet National Mirror reported that during a national event on money laundering and crime prevention, the Deputy Governor of the Central Bank of Nigeria, Mr. Okwu Nnanna, described digital currency as being controlled and issued by its developers, and only popular among a certain niche.

“The Financial Action Task Force, FATF, has observed that Virtual Currency Payment Products and Services, VCPPS, present opportunity for money laundering and other crime risks that must be identified and mitigated. So, in order to curb money laundering, virtual currencies should be regulated.”
— – Okwu Nnanna, Central Bank of Nigeria Deputy Governor

Nnanna is also head of the bank’s financial stability division, and his speech was part of the Second Anti-Money Laundering/Combating Financial Terrorism Stakeholders Consultative Workshop organised by Association of Certified Anti-Money Laundering Specialist, ACAMS, in Abuja. During the speech he stated that, “virtual currency is not a legal tender of any country; hence it has a borderless nature without jurisdiction, which makes it a channel for money laundering.”

The central bank also recently banned importers from using the foreign-exchange market for some goods as it seeks to conserve external reserves. Forty items ranging from private jets to rice, wheelbarrows and Indian incense are covered by the edict. The regulator also stopped Nigerians from using hard currency from the interbank market to buy Eurobonds and foreign shares.

Like much of Africa, Nigeria has seen very little activity in the digital currency space, despite many advocates highlighting the potential for the technology in the region. South African exchange iceCUBED became one of the only bitcoin businesses to service the area after it entered the country in January of this year. The company also said they were exploring a digital currency-powered merchant payment solution and remittance offering for the Nigerian market.

Nigeria has been on the radar for many African bitcoin entrepreneurs. The country has the largest populous, and the largest economy, on the continent. Bitpesa, a bitcoin exchange and remittance service operating in Kenya, Uganda, Tanzania and Ghana, said the startup was looking to expand into the country later this year, due the market opportunity. Beam, a bitcoin service operating in Ghana, also expressed interest in Nigeria when it launched nearly a year ago, but has yet to offer services there.

As seen in many jurisdictions, including the US and UK, regulatory clarity could help pave the path for bitcoin businesses looking to operate in many countries, helping to secure bank accounts and establish compliance regimes.

The Deputy Governor did say not say any regulatory framework was in place, but did express that the central bank considered it an immediate problem. According to Nnanna, regulation would be necessary in order to complete Nigeria’s ongoing reforms, and to better reduce money laundering in the country. “Virtual currencies present a wide range of issues and challenges that require financial authorities to consider and the challenges posed are unique and call for urgent regulator responses.”

“I want to join voice with FATF to urge industry players to cooperate and work actively together to address the concerns and challenges raised by the use of virtual currencies in the global financial market.’’
— – Nnanna

The conference, as well as a the call for virtual currency regulation, is part of the central bank’s larger initiative to drive illicit money out of the country and improve the reputation of the country’s financial industry.

During his own speech, Chairman of Economic and Financial Crime Commission, Mallam Nuhu Ribadu, reminded the audience that at one time Nigerians could not get credit card, including Visa or MasterCard, due to the country’s reputation, nor could Nigerian banks get an international loan. The Chairman added that while things were improving, more was needed to be done to remove “dirty” money from the country, which he still sees as prevalent.

“When I look around I see a lot of investments that was done with dirty money. Government needs help in identifying and catching these people. Though it may seem like a daunting task, but with professionals like ACAMS, Nigeria is already poised to achieving this.”
— – Mallam Nuhu Ribadu, Chairman of Economic and Financial Crime Commission

One of the latest measures from the Central Bank of Nigeria was implementing Bank Verification Numbers (BVN), for all Nigerians in and out of the country. The move is an attempt to better track the flow of funds among banks, and better identify who owns funds.

The Herald, a Nigerian newspaper, reported that a circular signed by the Director of Banking and Payment System at the Central Bank of Nigeria, Mr. Dipo Fatokun, stated that, “Nigerian banks abroad are expected to capture necessary data, generate a BVN and communicate same to the customers. Thereafter, the customers are expected to forward the assigned BVN to their banks, for linkage with their accounts.”