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Nigerian Central Bank Explores the Blockchain and Cryptocurrencies

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The Central Bank of Nigeria is reportedly exploring the potential of blockchain technology and its application in various sectors. This represents a fundamental shift in the regulator’s position after its earlier announcement this year, cautioning the public against trading in digital currencies, and prohibiting banks from holding any cryptocurrency reserves.

Nigeria now joins a number of African nations such as Kenya where regulators have warned against the use of bitcoin but are open to blockchain technology and its possible uses.

The Nigerian Central Bank is Now Exploring Blockchain Technology

In January 2017, the Nigerian capital markets regulator informed the public to be wary of speculating with digital currencies such as bitcoin. The Nigerian bitcoin space has witnessed tremendous growth over the last few years, which has been mainly driven by people looking to hedge their wealth in the face of a depreciating local currency, the naira. Other reasons for the high bitcoin adoption rate include bitcoin’s use as an effective medium for cross-border remittances and as a potentially profitable investment.

Therefore, it was no surprise the Central Bank of Nigeria’s (CBN) notices caused some confusion and uncertainty among the local bitcoin community. However, it appears things may be looking up for bitcoin in Nigeria going by a recent report from the Guardian. According to the report, the CBN is actively working on a whitepaper on digital currencies and its underlying technology the blockchain. The institution has already allocated personnel and resources towards the study of virtual currencies.

Speaking at a recent cryptocurrency conference in Lagos, the central bank’s deputy director, Musa Jimoh acknowledged the central bank was softening its stance on digital currencies and saw it as a decentralised outlet for personal wealth that is free from interference and confiscation. He added,

“[The CNB] cannot stop the tide of waves generated by the blockchain technology and its derivatives. Currently, we have taken measures to create four departments in the institution that are looking forward to harmonise the white paper on cryptocurrency.”

The Blockchain is the Future

Chimezie Chuta, organiser of the Blockchain Nigeria Conference 2017, stressed the need for young people to learn more about blockchain technology and maximise on employment opportunities that will arise with as more companies start experimenting with the distributed ledger technology. He pointed out smart contracts, healthcare, identity management, and e-voting as areas that could particularly benefit from blockchain-based solutions.

The head of Nigeria’s cybersecurity agency, Dr. David Isiawe, added:

“The impact of the emergence of blockchain and cryptocurrency will be felt in the nation just as in the global community. Nigerian must be proactive rather than reactive by considering how these technologies would affect and influence our lifestyles and business operations and channel and thus fashion our rules of engagement for their adoption.”

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Nigeria Hosts the Only Bitcoin Node in West Africa

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The city of Lagos is a vibrant metropolis in Nigeria, that not only serves as an Administrative Capital but is also a leading financial hub in Africa. Somewhere among the tall skyscrapers and multitudes of people there exists a reachable bitcoin node. The node, which is the only one of its type in West and Central Africa, is owned and run by Tim Akinbo, a 35-year-old software developer according to a report by VCE Motherboard.

Tim managed to set up the bitcoin node on a server at a datacenter and aims to bridge the gap in inter-Africa money transfers. In an interview with VICE Motherboard, he says this about the current African financial ecosystem:

“Moving money from one country to another in Africa can be very tough, right now it’s easier for you to send money to the US than it is to send it to another African country. I saw bitcoin as a technology that could really change that.”

What is a bitcoin node?

Sometimes referred to as a full node, a bitcoin node is a program that validates transactions and blocks in the bitcoin blockchain. Nodes are important to the bitcoin network since they confirm transactions, facilitate the creation of new blocks and compare them against the bitcoin core consensus requirements.

The latest stats from Bitnodes shows there are over 5500 nodes are supporting the bitcoin network. This is crucial to the success of the entire bitcoin network because of the role the nodes play in maintaining a decentralized database of transactions.  By communicating to one another the nodes ensure peer-to-peer transactions are verified across the network.

To keep the network running, members volunteer their computing power and bandwidth to run the bitcoin software together with a stored copy of the blockchain. So far, the distribution of nodes is denser in North America and Europe, whereas Africa, Asia, and South America have a few spread around.

New Possibilities

In 2016, Nigeria witnessed an increase in the adoption of bitcoin and other cryptocurrencies in the country. This has been attributed to a number of factors key among them, out-of-control inflation, an unstable naira and the spread of investment schemes that encourage people to invest in the bitcoin space. Such was the interest in bitcoin that the Nigerian Securities and Exchange Commission sent out a warning against the use of bitcoin.

As Akinbo, mildly put it, “Last year we had an explosion in the use of bitcoin in Nigeria, at the end of the year I got a call from my dad asking where he could buy bitcoin from! That’s when I knew it was reaching the mainstream.”

That being the case, he chose to set up his own node so he could learn more about the inner workings of bitcoin and play his part in supporting the network. However, when it boils down to this option, not many Nigerians can do the same. For one, the server Akinbo uses costs $32 or 10,000 nairas a month, which is out of the reach of most people in a country where GDP per capita is $3,000.

Still, things are looking good for bitcoin in Africa, with top banks partnering with fintech startups to roll out money transfer services. The banks are harnessing bitcoin and blockchain technology to better compete with telecom providers, for cheap and faster money transmission services.

Hopefully, Tim Akinbo won’t be the only one sets up a node in West Africa for much longer.

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