• The Nigerian Senate Committee underscores the urgent need for a clear regulatory framework for cryptocurrency to safeguard investors and stabilize the market.

• President Tinubu’s administration advocates for developing the capital and crypto markets to safeguard the local currency.

• Crypto Regulation is considered necessary to protect investors from the hazards associated with unregulated digital asset trading.

The Nigerian Senate Committee on Capital Markets has called for cryptocurrency regulation and warned that the country’s unclear position could be costing the country. The committee also urged the government of Bola Tinubu to develop the capital and crypto markets to defend the local currency.

Nigerian Senate Committee: Crypto Regulation  Trading for a Boost for Local Currency

The Nigerian Senate Committee on Capital Markets has underscored the need for comprehensive crypto regulation to protect investors engaged in digital asset trading. Committee chairman Osita Izunaso argues that regulation is the only logical step since authorities have failed to stop residents from trading crypto assets.

According to a local report, Izunaso made these remarks shortly after Emomotimi Agama, the recently appointed Nigerian Securities and Exchange Commission director-general, appeared before the committee.

Izunaso, who briefed journalists shortly after screening Agama and three commissioners, cautioned that Nigeria could lose out due to its unclear stance on cryptocurrency.

Despite having one of the largest crypto markets globally, Nigeria still needs to maintain a coherent position on crypto assets. This inconsistency was evident in the Central Bank of Nigeria (CBN) and the Securities and Exchange Commission (SEC) stances.

While the SEC has consistently signalled its willingness to regulate crypto assets, the CBN took measures to suppress the growth of crypto trading.

Impact of Naira Depreciation on Markets

The departure of former Central Bank of Nigeria (CBN) governor, Godwin Emefiele, led to a gradual shift in the central bank’s stance on cryptocurrencies. This shift culminated in the rescinding of the CBN’s February 5 directive.

However, when the local currency rapidly depreciated against the U.S. dollar earlier this year, Nigerian authorities targeted alleged currency speculators using crypto exchange platforms like Binance.

Since then, Nigerian officials have taken measures to restrict crypto trading. These actions include ordering global crypto exchange platforms to delist the local currency. The West African nation has also taken decisive actions against Binance, accusing the platform of facilitating currency manipulation. 

Despite these measures, Nigeria remains among the top five countries with the keenest interest in bitcoin globally. This situation has prompted the president of the Nigerian Senate Committee to urge Bola Tinubu’s administration to develop the capital and crypto markets to defend the local currency.

Senate Proposals for Crypto Market Development

In light of these developments, the Nigerian Senate Committee  has proposed several measures to encourage the growth of the crypto market.

These proposals include creating a designated regulatory framework for Initial Coin Offerings (ICOs) and establishing clear guidelines for crypto exchanges operating within the country. The committee hopes to attract local and international investors to participate in the burgeoning market by defining legal parameters.

Recommendations for Stabilizing the Naira

In response to the ongoing challenges posed by the fluctuating value of the Naira and the inconsistent approach to cryptocurrency regulation, the Nigerian Senate Committee on Capital Markets has put forth several recommendations.

Firstly, the committee advocates for establishing a unified regulatory framework that aligns the policies of the Central Bank of Nigeria and the Securities and Exchange Commission. Such a framework would provide clear guidelines and foster a stable environment for local and foreign investors.

Secondly, the committee recommends that the government encourage the integration of advanced technologies in financial markets to enhance transparency and efficiency. By leveraging blockchain technology, transactions could be more secure and traceable, potentially reducing market manipulation cases.

Additionally, the committee emphasizes the importance of public education and awareness programs. Informing the populace about the risks and opportunities associated with cryptocurrency could lead to more informed decision-making, thereby protecting retail investors from potential losses.

Lastly, developing local crypto exchanges and digital financial products tailored to the Nigerian market could stimulate economic growth and provide alternative investment opportunities for Nigerians. This approach could also contribute to stabilizing the Naira by increasing its utility and demand in digital markets.

The Nigerian Senate’s Call for Action

“That is what is crushing the Naira and making the Naira so little when it’s competing with other currencies. But if we develop our capital market, and develop our crypto market, we will bring more liquidity into the system. That will help to cushion all the problems we have,” Izunaso stated.

Meanwhile, Agama, seen as pro-innovation, has vowed to turn around the Nigerian capital market and change the narrative. He added that the SEC will introduce innovative programs that will lead to the creation of world-class companies.

ALSO, READ; Collaborative Regulation: CBN and SEC’s Approach to Crypto Oversight in Nigeria.

In summary, the Nigerian Senate Committee’s push for crypto regulation and developing the capital markets aims to protect investors and stabilize the local currency. Nigeria can position itself as a leader in the evolving crypto landscape by focusing on digital asset trading and addressing naira depreciation.