He said this during a Senate Plenary on Thursday. where he argued that cryptocurrency technology was ‘so strong’ and he saw no regulation the Senate would propose to stop it in Nigeria.
“Cryptocurrency has become a worldwide transaction of which you cannot even identify who owns what. The technology is so strong that I don’t see the kind of regulation that we can do. Bitcoin has made our currency almost useless or valueless,” he claimed.
“If we have an economy that is very weak and we cannot regulate cryptocurrency in Nigeria, then I don’t know how our economy would be in the next seven years,” said Musa.
After deliberation for and against cryptocurrency by the Senators, the Senate resolved to mandate the Committee on Banking, Insurance and other Financial Institutions; Committee on ICT and Cybercrimes; including the Committee on Capital Market, to invite the CBN governor for a briefing on the opportunities and threats of cryptocurrency on the nation’s economy and security and report back findings within two weeks.
The Central Bank of Nigeria (CBN) had, on February 5th , sent a circular to financial institutions, instructing them to immediately close the accounts of persons or entities transacting in or operating cryptocurrency exchanges. The apex bank said breaches to the directive would attract severe sanctions on the banks.
While Musa’s submission was met with critical responses, The ICIR recalls the Niger East Senator had also sponsored the Anti-Social Media Bill.
The bill entitled ‘Protection from Internet Falsehoods and Manipulation And Other Related Matters Bill,’ otherwise known as Anti-Social Media bill, was presented before the Nigerian Ninth Assembly in 2019 to ‘regulate the social media.’
The bill, which passed the second reading of the Nigerian Senate, sought to regulate information on the internet by the Nigerian government.
Although the bill faced criticisms from many Nigerians, civil society organisations, rights activists and the opposition party, it was put to a public hearing.
Examining Musa’s Claim
There is yet no strong evidence that cryptocurrencies affect the value of money because they are not legal tenders, so are not officially accepted by many countries for transactions. But some economists disagree, stating that cryptos are serious threats to traditional currencies.
Ruchir Sharma, chief global strategist at Morgan Stanley investment management, one of the biggest American investment firms, said that cryptos were big threats to the US dollar. He argued that lack of trust in traditional finance would drive down the value of dollar, forcing people to embrace digital currencies.
He explained, in a Financial Times article in December 2020, that traditional currencies were not the only stores of value and mediums of exchange worthy of people’s trust, arguing that tech-savvy people would continue to seek alternatives to traditional currencies.
However, classical economics argues that the value of money is determined by interest rate, inflation, gross domestic product (GDP) growth and current account balance. More so, the strength of a country’s currency is determined by the exchange rate. A weak exchange rate regime reduces the value of money, but a strong regime produces an opposite effect.
The exchange rate is influenced by a country’s local manufacturing industry and its export sector. A country like Nigeria with a weak manufacturing sector exports little and earns little foreign exchange that cannot withstand demand. But another country like China with a strong manufacturing sector exports much and earns enough foreign exchange for its economy. In the case of Nigeria, demand for foreign exchange exceeds supply, thus weakening the naira. But in the case of China, supply exceeds demand, thereby strengthening Yen.
“We need to start taking the export sector seriously in order to reduce imbalances in the economy caused by scarcity of foreign exchange and strengthen the naira,” Ede Dafinone, an economist and accountant, who also heads the Manufacturers Association of Nigeria Export Group (MANEG), said.
“Exporters need to be supported. Government needs to speed up the Export Expansion Grant (EEG) implementation,” he further said.
Nigeria is not exporting enough and crude remains its major export component. In 2018, Nigeria’s total non-oil export earnings from more than 25 commodities amounted to 3.3 billion dollars, according to the National Bureau of Statistics (NBS). But Bangladesh, once one of the poorest countries on earth, earned 10 times that amount (33 billion dollars) from exporting only one product—textile.
In the last quarter of 2019, the value of total exports stood at 4.8 trillion naira. Crude oil component amounted to 3.6 trillion naira or 76.08 percent of total exports during the period while non-crude oil export accounted for 1.14 trillion naira, or 23.92 percent of the total, according to the NBS. For 2019, the share of crude oil exports stood at 76.5 percent, according to the NBS. In the second quarter of 2020, crude oil and minerals accounted for 84.35 percent of total export, amounting to N1.87 trillion.
The Manufacturers Association of Nigeria(MAN) said in one of its press releases that the sector remained a critical part of the economy in terms of foreign exchange earnings, job creation and economic growth.