Four Ways Nigeria’s New Blockchain Policy Can Expand the Digital Economy
On the 3rd of May, the Federal Ministry of Communications and Digital Economy (FMCDE) gave its approval to a national blockchain policy. In a tweet announcing the policy, it was noted that the policy’s vision aims to establish an economy powered by blockchain technology, enabling secure transactions, data sharing, and value exchange among individuals, businesses, and the government.
The policy document was developed by the National Information Technology Development Agency (NITDA), and it was tagged the ‘National Blockchain Adoption Strategy’. The document encompassed policy and strategy frameworks that provide guidance for the utilization of blockchain technology in Nigeria.
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According to the statement released by the FMCDE, the initiative of a National Blockchain Policy aligns with the 7th Pillar of the National Digital Economy Policy and Strategy (NDEPS), which emphasizes the development of a Digital Society and the adoption of Emerging Technologies. And according to the document, the primary objective of the strategy is to
“…identify and utilize the opportunities provided by Blockchain technologies to strengthen the country’s security on cyberspace and stimulate the growth of the economy.”
After the launch of the policy document, a steering/implementation committee was inaugurated on the 16th of May. According to the Minister for Communication and Digital Economy, Isa Pantami, “blockchain technology and all its components and types are no more illegal in Nigeria.”
This policy document plus further actions to be taken by the steering committee is expected to
1. Foster Innovation and Entrepreneurship
The ban on cryptocurrencies by the CBN in 2021 dealt a significant blow to local blockchain startups in Nigeria, disrupting the country’s rapid progress in blockchain adoption. The effect of the ban was so dastard that web3 companies across the country had to shut down operations.
Stephen Kusu, the founder of Gonana, a blockchain-based Agritech startup noted “… The fight against cryptocurrencies by the CBN in 2021 crippled the traction Nigeria was creating with the technology.”
However, with this step to create a supportive regulatory environment, the government can attract local and foreign blockchain startups and encourage investment in the sector. One of the policy focus areas is research, development & innovation. By promoting blockchain research in Nigeria, the government can drive innovation thus contributing to the global blockchain ecosystem.
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2. Enhance Financial Inclusion
Nigeria is far behind its goal of achieving 70% financial inclusion by 2020. By leveraging blockchain technology, Nigeria can significantly improve financial inclusion. Blockchain-based solutions offer secure and transparent platforms for conducting financial transactions.
In the policy document, secure financial services were listed as one of the potential use cases of blockchain technology by the government. Through blockchain-powered financial services, individuals and businesses in remote areas can access banking services such as loans, and secure digital identities, promoting economic participation and empowerment.
An article in the Stanford Social Innovation Review noted ways through which blockchain could improve financial inclusion, and they included setting up payment services, saving, credit facilities, and insurance.
3. Enhance Supply Chain Management
Nigeria’s new blockchain policy has the potential to revolutionize supply chain management. By implementing blockchain-based tracking systems, Nigeria can improve transparency, traceability, and accountability throughout the supply chain. This will help eliminate inefficiencies, reduce fraud, and enhance trust between various stakeholders. From agriculture to manufacturing to logistics, blockchain technology can optimize processes, reduce costs, and ensure fair compensation for all participants.
Blockchain technology has the potential to assist all stakeholders involved in the supply chain by granting them access to shared information, while also lowering transaction costs and minimizing the risk of errors.
4. Increase Efficiency in Government Services
Blockchain technology has the power to enhance efficiency and transparency in government services. Following through with the policy can pave the way for blockchain-powered solutions that streamline bureaucratic processes, and improve service delivery.
Smart contracts, for instance, can automate and secure various government functions such as land registration, voting systems, and public procurement. By digitizing and decentralizing these processes, blockchain can minimize human error, eliminate intermediaries, and foster trust between citizens and the government.
Nigeria’s Relationship with Blockchain Technology
Nigeria’s history with blockchain technology has been quite a love-hate relationship, loved by the people, hated by the government. Since early 2016, there has been a notable surge in the adoption of digital currency trading in the Nigerian financial sector. And the sudden rise caught financial regulators off guard, leading to panic among them as numerous investment schemes flooded the market thus causing the CBN to announce a ban on cryptocurrency activities among Nigerian financial institutions in 2021.
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After CBN instituted the ban, they launched the e-Naira. With the e-Naira, Nigeria became the first African country to launch a CBDC and the second country globally after the Bahamas. However, the IMF noted that as of November 2022, e-Naira had only 942,000 downloads with about 8% wallet usage as most people remain sceptical of the government’s effort. And despite the government’s crypto ban, Nigeria still ranked 11th in the global crypto adoption index.