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Despite restrictions, peer-to-peer (P2P) transactions are still legal in Nigeria and crucial for financial autonomy and inclusion. The Central Bank's actions aim to control the naira's value but haven't stopped P2P exchanges, which bypass traditional banks and empower the economy.
In recent times, I've been overwhelmed with questions about the current state of peer-to-peer (P2P) transactions in Nigeria. The common concern revolves around whether the Nigerian government is banning P2P transactions.
My response has remained consistent: No, they are not banning P2P transactions.
While the Central Bank of Nigeria (CBN) can restrict Naira (NGN) P2P transactions on crypto exchanges, it is challenging to ban P2P transactions altogether.
The CBN's directive to major exchanges like Binance, Kucoin, and OKX to delist NGN from their P2P platforms means that you can no longer buy or sell NGN on these platforms. This action aims to prevent manipulation of the naira's value against foreign currencies. Despite these efforts, the anticipated strengthening of the naira has not materialized.
In this article I’ll be shedding light on:
In today's fast-paced digital age, the quest for financial freedom is more attainable than ever before. Central to this transformation is the rise of Peer-to-Peer (P2P) transactions, a revolutionary approach to financial exchanges that empowers individuals to conduct business directly with one another, bypassing traditional intermediaries.
A Peer-to-Peer (P2P) transaction refers to the direct exchange of digital assets between individuals without the involvement of intermediaries such as banks or payment processors. In a P2P transaction, participants use digital wallets to transfer assets directly to each other, with the transaction details recorded on a decentralized blockchain network. This mode of transaction is known for its transparency, security, and efficiency.
On December 22 2023, the Central Bank of Nigeria (CBN) canceled its previous rule that stopped banks. The new guideline emphasizes how the banks should handle accounts for virtual asset service providers (VASPs), the central bank said this new rule also replaces the ban from January 12, 2017.
The lifting of the ban on direct cryptocurrency purchases in Nigeria was initially hailed as a major advancement for digital assets in the country. Previously, due to the ban, many Nigerians had to depend on peer-to-peer (P2P) transactions to buy crypto, as they couldn't use their bank accounts directly. However, this regulatory shift occurred amidst significant economic issues, particularly the fast devaluation of the naira.
Earlier this year, the devaluation of the Nigerian naira became a pressing issue. On March 13th, the naira plummeted to N1,615 per U.S. dollar, causing a sharp rise in the prices of food, commodities, and services nationwide. This rapid decline made the naira the worst-performing currency globally last month.
In April, the cost of food in Nigeria surged by 40.53% yoy, marking the highest annual increase on record. Historically, from 1996 to 2024, Nigeria's food inflation rate averaged 13.34%, peaking at this recent high of 40.53% in April and reaching its lowest point at -17.50% in January 2000.
To delve into the reasons behind this rapid devaluation of the naira, I decided to reach out and gather insights from Obinna Iwuno, President of SiBAN (Stakeholders in Blockchain Association of Nigeria) and he has this to say; “Floating the Naira in an open market, without the right economic policies and strategy to support it will leave the currency to speculators.
The reason why we are talking about this is the fact that we import more than we produce, and so we always need more dollars than we are earning. This shortage in FX will leave the demand quadrant to seek other sources of supply to meet their needs.
Nigeria imports a lot from China, but we are yet to activate the currency swap idea with China that will enable Nigerians to buy goods from China and pay in Naira and vice versa. These are ways this can be curbed.”
I also contacted James Otudor, a pro-Bitcoin politician, to get his viewpoint. He shared his thoughts on the situation: “A complete ban on P2P will backfire. It could push Nigerians towards unregulated black markets, making it even harder to track and control activities… I believe these restrictions are unfair and ultimately harmful. That's why I'm taking a strong stand and challenging them in court. While I understand the CBN's desire to protect the financial system, this approach unfairly restricts Nigerians' access to financial tools and innovations.”
Aside from being a consuming country, another reason why we are seeing a rapid decrease in our purchasing power this year is the excess printing of Naira by the CBN, this year the apex bank has printed over N17.7trn and this has caused our inflation rate to increase to 33.69% contrary to IMF's prediction of 23 per cent in the year.
The main reasons we're seeing our purchasing power drop are not peer-to-peer transactions. Instead, it's due to other issues, such as the excessive printing of naira. However, it seems the apex bank wouldn’t admit to this and often makes excuses to justify its actions, leading to even more devaluation and economic problems for the country.
The Central Bank of Nigeria (CBN) has taken steps to address the devaluation of our currency. However, these actions didn't target the real cause: printing too much naira. Instead, they blamed peer-to-peer (P2P) and over-the-counter (OTC) traders, as well as crypto exchanges. The CBN even banned their websites and told them to stop using naira in their peer-to-peer transactions.
Read our other article on the woes facing the Nigerian economy and it's currency.
Reflecting on the significant volume of peer-to-peer (P2P) transactions, Ray Youssef (CEO of NoOnes) recently pointed out, “Nigeria's P2P trading volume on centralized exchanges is reported at about $59 billion. However, this figure only reflects transactions that are trackable on the blockchain. The real volume, including untracked peer-to-peer (P2P) trades on platforms like WhatsApp and Telegram, is likely much higher, possibly reaching a half-trillion dollars. This highlights the immense and ongoing scale of Nigeria's P2P market, which significantly surpasses the official figures.”
Peer-to-peer transactions facilitate direct exchanges between individuals using digital assets. Unlike traditional financial systems that rely on banks and other intermediaries, P2P transactions occur directly between parties through digital wallets.
Blink introduces a free open-source solution for creating and redeeming Dollar/Bitcoin vouchers using LNURLwithdraw codes, aiming to facilitate the sale of Bitcoin for fiat easily. It offers flexible vendor commissions, and zero upfront costs, and is tailored for exchange offices in cash-based economies.
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One of the most significant benefits of P2P transactions is the financial autonomy they provide. By eliminating intermediaries, individuals gain direct control over their assets. This autonomy is particularly beneficial in regions with limited access to traditional banking services, fostering a sense of empowerment and self-reliance.
Traditional financial transactions often come with various fees imposed by intermediaries. These costs can add up, especially for international transactions. P2P transactions typically incur lower fees since they bypass intermediaries, making them a cost-effective option for small businesses and individuals engaging in cross-border trade.
P2P transactions are not limited by geographical boundaries. They enable individuals and businesses to transact with anyone, anywhere in the world. This global reach opens up new opportunities for trade and collaboration, allowing small businesses to expand their markets and individuals to access a broader range of products and services. This democratization of international market access fosters economic growth and innovation.
In many parts of the world, millions lack access to basic banking services, limiting their ability to participate in the global economy. P2P transactions provide an accessible alternative to traditional banking. With just a smartphone and internet access, individuals can participate in P2P transactions, gaining access to financial services previously out of reach. This inclusivity promotes economic participation and can help lift individuals out of poverty.
The flexibility and efficiency of P2P transactions encourage innovation and entrepreneurship. Startups and small businesses can use P2P platforms to raise funds, manage payments, and conduct transactions without the constraints of traditional financial systems. This freedom to innovate fosters a dynamic business environment where new ideas and solutions can thrive.
The power of P2P transactions, particularly through Blink vouchers, lies the ability to unlock financial freedom for individuals worldwide. By providing enhanced financial autonomy, promoting transparency and security, reducing transaction costs, facilitating global trade, supporting financial inclusion, and encouraging innovation, P2P transactions are transforming the financial landscape. As more individuals and businesses embrace this revolutionary approach, the potential for achieving true financial freedom continues to grow, heralding a new era of economic empowerment and opportunity.
