The growing adoption of blockchain, Decentralised Finance (DeFi), Web3, and NFTs around the world and in Nigeria should lead to the creation of enabling regulatory policies around these innovations, experts have said.
The experts that participated in the TechNext Conference 2.0 on Monday, with over 2,000 people in attendance, said Nigeria cannot afford to sit and watch while the rest of the world takes strategic positions in these innovations.
DeFi, for instance, is helping to grow financial inclusion through inclusive lending and expanding the frontiers of the financial system. These are critical areas for the country. Despite many interventions by the Central Bank of Nigeria (CBN) to increase bank lending, there are still huge gaps in access to credit in the country. The over 17 million small and medium-scale enterprises (SMEs) still struggle with funding.
The experts say blockchain and digital assets can bridge this gap. Hanu Fejiro, founder and CEO of Patricia says innovations like Web3 are special because it combines the tokenisation of wealth and assets like gold into virtual options like cryptocurrencies and NFTs.
“Web3 is the third version of the internet. The ownership rights are what makes web3 so unique and Africa stands to be the first gainer because for the first time you can own assets in the form of NFTs, cryptos and digital tokens,” Fejiro said.
He also sees Web3 playing a critical role in real estate.
“With crypto, you can begin to think about fractionalised NFTs. You don’t have to buy the whole property, you can buy the tokenised version bits by bits. This basically gives the common man who doesn’t have 100 million naira, but 10 thousand naira to have a property on the banana island and Eko Atlantic. These are the new ways of wealth creation that web3 gives
The value of transactions in the crypto market in Africa grew by over 1,200 percent in 2021. Chainalysis estimates that African countries collectively received around $105.6 billion worth of cryptocurrency between July 2020 and June 2021.
However, Africa is still the smallest crypto economy of all the regions that the research firm studies. A major barrier is the stance of many financial services regulators.
In Nigeria where the CBN has mandated all financial institutions not to have any transactions with crypto businesses and ordered accounts belonging to these businesses to be closed, the rate of adoption and crypto activities in the country have been significantly impacted. For example, the country, for the first time since 2017, failed to make the top 10 on the Chainalysis list of countries with the highest crypto activities.
Senator Ihenyen, President of Stakeholders in the Blockchain Technology Association of Nigeria (SiBAN) said while Nigeria’s non-inclusion in the top ten is worrying, the country still remains the largest market in terms of volume of crypto activities in Africa.
He is also optimistic that the Nigerian government isn’t totally aligned with an outright ban of digital assets in the country as China has done. In any case, a ban still doesn’t affect the level of adoption in the country. China is among the top ten in crypto usage. Ihenyen says this is because China has already made a lot of investment in digital assets infrastructure. Nigeria on the other hand loses out on these investments due to the position of the CBN on the market.
Other experts say the concern of the CBN that the growing popularity of blockchain and digital assets makes their role and banks redundant, is not completely true.
Emmanuel Babalola, CEO of Bundle Africa, The central banks will continue to play a role in a regulated digital asset world while banks and crypto businesses can exist side-by-side. In essence, the crypto market wasn’t created by Satoshi to replace traditional banking institutions but to complement their efforts. But the early market adopters had presented it otherwise.
“Back then, we wanted to replace the existing [financial] system. But over time, we have come to realise that in the ideal world, many of the existing systems would have to evolve. When Satoshi created Bitcoin, It was meant to be an alternative and not a replacement,” Babalola said.