Blockchain Technology
Blockchain technology is?a distributed ledger technology that records transactions across a network of computers in a secure, immutable, and transparent manner. The unique features of the technology, including its immutable recordkeeping, secured transaction system, transparency, stakeholder consensus, etc., have made it attractive to global institutions, governments, the private sector, and international economic and socio-political stakeholders. Consequently, global, regional, and national economies are taking giant strides in the adoption of this technology for their improvement and effective service delivery.
Nigeria, as a?leading economy in Africa, has in recent years taken strides to create an enabling environment for the development of emerging technologies. The recognition of the potential benefits that emerging technologies, including Blockchain, hold for the advancement of the nation has spurred proactive efforts in formulating policies and action plans to foster innovation in this sector.
In 2019, the?National Digital Economy Policy and Strategy (NDEPS) was advanced to strategically position the Nigerian economy for harnessing the vast opportunities presented by emerging technologies, including Blockchain. Throughout 2023, BSV blockchain, known for its focus on scaling and micropayments, witnessed increased adoption and partnerships in Nigeria. Domineium Blockchain Solutions, a BSV-based company, partnered with NITDA to organize the Digital Nigeria International Conference, further solidifying BSV's presence in the Nigerian blockchain ecosystem.
Additionally, BSV-powered solutions?were implemented in pilot projects for land registry and identity management in certain regions, showcasing the technology's potential for real-world applications. These developments, fueled by BSV's unique technical features and strategic collaborations, highlighted the potential of specific blockchain implementations within the Nigerian context.
The Digital Society?and Emerging Technologies pillar, one of the eight pillars of the NDEPS, served as a foundation for the development of the National Blockchain Policy for Nigeria in 2023, by the Federal Ministry of Communications and Digital Economy.
This policy articulates?a framework for the acceptance, adoption, innovation, and responsible use of Blockchain technology. It analyzes the potential benefits the technology holds for the nation, such as financial inclusion, increased efficiency, job creation, improved transparency and accountability, enhanced security, and more. The policy envisions the creation of a blockchain-powered economy that supports secure transactions and value exchange, fostering innovation, trust, and development. The National Blockchain Policy for Nigeria is a timely show of the government’s commitment towards the development of the nation’s digital economy and it has been hailed for its laudable policy statements. The development of the Policy is particularly important at a time when a significant percentage of the Nation’s population owns digital assets traded via the deployment of blockchain technology.
A 2022 global?crypto adoption index reported that Nigerians have the highest per capita cryptocurrency adoption rate of a country in the world, accounting for about 32% of the total global adoption rate and this has continued to increase with more recent statistics showing that about 10% of the Nigerian population own digital assets chief among which are cryptocurrencies.
Furthermore, the government?aims to promote the adoption of blockchain technology, particularly in the financial sector and the policy evinces the objective of the government to establish a regulatory framework that enables the safe, responsible, and optimal use of cryptocurrencies in Nigeria in a way that ensures consumer protection, market stability and financial inclusion and work with industry stakeholders to develop standards for the listing and trading of cryptocurrencies on regulated exchanges in Nigeria.
Nevertheless, a pressing?question that may come to mind is:
“What will be?the fate of the CBN circular of February 5th, 2021 which bans cryptocurrency transactions in the financial sector and orders the closure of accounts of individuals or organizations engaging in cryptocurrency transactions?”
Having described the?Policy as a roadmap for Nigeria’s adoption and utilization of Blockchain Technology, including in the financial sector, with an allowance for cryptocurrencies, one would hope that the coming year will be definitive of the fate of the ban on crypto transactions in the banking and financial sector. However, in a rather pleasant twist of events, perhaps as a Christmas gift, the Central Bank of Nigeria, in a circular dated December 22, 2023, with reference number FPR/DIR/PUB/CIR/002/003, called for a disregard of its earlier circular dated the 5th of February 2021, as a result of the fact that recent global economic trends have made it pertinent to regulate transactions relating to digital assets.
Thus, while banks?and other financial institutions are still prohibited from holding, owning or trading in virtual assets, other categories of persons and institutions may do so subject to strict compliance with the laid down procedure in the issued guidelines. This, no doubt, fosters the spirit and the intent of the Blockchain Policy in the financial sector and the coming year projects a promise of its spread into other sectors.
Moreover, one can?hope that a starting point for the nation in the coming year, will be the provision of a legal and regulatory framework to regulate the blockchain industry as this will not only protect investors and other stage players, it will engender confidence and foster innovation and talent development in the industry as a whole.
If the laudable?provisions of the National Blockchain Policy for Nigeria were anything to go by, one can safely assume that the year 2024 holds a lot in store for the blockchain industry in Nigeria.
?Digital Lending
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As the global?financial landscape evolves, Nigeria finds itself in the epicentre?of the fintech revolution. It has a thriving ecosystem of creative enterprises and startups reshaping the way financial services are offered and consumed, with a special emphasis on digital lending.
Nigeria stands at?the forefront of the FinTech revolution as the global financial landscape transforms continuously. The country takes pride in its thriving ecosystem of pioneering companies that are reshaping the way financial services are delivered and consumed, with a particular focus on digital lending.
The rapid emergence?of digital lending has provided Nigerians with a contemporary avenue to secure loans. Platforms such as Palmpay, Fair Money, and Palm Credit have gained significant popularity, particularly among Small and Medium Enterprises (SMEs) seeking financial assistance.
Unlike the traditional?procedures followed by commercial and microfinance banks, involving cumbersome form completion, physical address verification, and customer identity provision, digital lending platforms have streamlined the loan application process, rendering it more convenient and straightforward.
In response to?the evolving landscape and to address the challenges posed by some unscrupulous actors within the sector, the Federal Competition and Consumer Protection Commission (FCCPC) has enacted the 'Limited Interim Regulatory/Registration Framework and Guidelines for Digital Lending 2022.' This regulatory initiative empowers the FCCPC to oversee and regulate the digital lending space, making registration and approval prerequisites for companies aspiring to operate in this domain. This regulatory move signifies a pivotal shift in the accessibility of loans in Nigeria, with digital platforms presenting a more efficient and user-friendly alternative to traditional banking procedures.
As of 2023,?the number of licensed digital lenders operating in Nigeria has surged to 211, according to the latest Federal Competition and Consumer Protection Commission data. Among these, 172 possess full approval, while 39 have conditional approvals. This marks a slight increase from the 204 licensed digital lenders reported in September 2023, as documented by the PUNCH newspaper on November 6th, 2023.
Notwithstanding the commendable?progress and approvals by the Government, a notable challenge in the lending landscape of Nigeria remains the limited access to data on the creditworthiness of individuals and businesses.
Looking ahead to?2024, the trajectory of digital lending in Nigeria is promising, but the regulatory landscape is expected to play a pivotal role in ensuring its sustainable and responsible growth.
Also, the dominance?of digital banking is anticipated to ascend to new heights. Fintech companies are poised to play a pivotal role in providing accessible and convenient banking services to the unbanked and under-banked populations. Digital lending is expected to foster transparency and accountability, attributes often lacking in traditional lending institutions. In the forthcoming years, we anticipate several initiatives from the FCCPC, including:
2. Fair collection?practices for unpaid loans from borrowers.
3. Guaranteed Consumer?protection rights.
This will help?strike a balance between fostering innovation and safeguarding the interests of all stakeholders involved in the digital lending ecosystem.
Nigerian Data Protection Act, 2023
The Nigeria Data?Protection Act, of 2023 represents a significant step in the right direction towards safeguarding personal data in Nigeria. Its implementation solidifies the rights of data subjects, reducing the need to rely on Section 37 of the constitution of the Federal Republic of Nigeria, 1999 to establish data protection in legal proceedings. While the Act undoubtedly makes a remarkable contribution to the growth of the sector, it is not without its limitations.
Before the enactment?of this act, the primary regulation governing the processing of personal data in Nigeria was the Nigeria Data Protection Regulation 2019 (NDPR), issued by the National Information Technology Development Agency (NITDA). However, the NDPR was considered a subsidiary legislation rather than a primary law hence the enactment of this Act.
As technology continues?to advance, so will the intricacies of data privacy laws in coming years. Navigating this landscape requires a proactive approach that prioritizes not only legal compliance but also the ethical treatment of personal data. By staying informed, implementing robust data governance practices, respecting consent and transparency, and fostering a culture of privacy, organizations can navigate the intricate web of data privacy laws successfully.