IMF Backs CBN, Cautions against Cryptocurrency Transactions

By Obinna Chima

The International Monetary Fund (IMF) has cautioned against transacting in cryptocurrency, saying regulating the digital currency remains a concern not just to the Central Bank of Nigeria (CBN) but to other regulators across the world.

The IMF Resident Representative for Nigeria, Mr. Ari Aisen, said this during a virtual media briefing on the Fund’s Article IV on Nigeria that was released last week.

The CBN recently directed banks and other financial institutions to close accounts dealing in cryptocurrency or facilitating payment for cryptocurrency exchange, with immediate effect.

It had also directed banks to expose any individual and entity running such accounts, warning that failure to adhere to the directives would attract strict sanctions.

The apex bank in the circular cautioned deposit money banks (DMBs), non-bank financial institutions (NBFIs) and other financial institutions (OFIs) and members of the public on the risk associated with transactions in cryptocurrency.

Responding to a question on the apex bank’s action, Aisen noted that a lot has been changing regarding the payment system, saying that, “the issue with some of these cryptocurrencies is that perhaps some care should be taken about their activities and the use of cryptocurrencies.”
He added: “Actually, central banks, not only in Nigeria have this concern about what kind of activities that cryptocurrencies might be supporting and how best to monitor those activities.

“Some of them are involved in illegal activities; some may be related to money laundering, even drugs and other initiatives and it is natural that the authorities would be extremely concerned about how best to supervise, improve and supervise the use of cryptocurrencies.”
He pointed out that there remains a dilemma around how best to regulate the digital currency.

“We know that the Central Bank of Nigeria is concerned about it and trying to decide the best policy around this for the benefit of the payment system and the sustainability of the financial system,” he added.

With the current rise in the price of crude oil, the IMF official said it would be difficult to say what level of crude oil price would allow Nigeria to stay afloat and come out from the recession faster.

This, he said was because of oil price volatility.

Aisen, however, advised policymakers in the country to be conservative in terms of oil prices because of its volatility.

“So, when the budget is put in place and other policies are put in place, it is best to consider oil prices at a considerable low level, rather than based on short-term variations of oil prices. “Having said that it is undoubtedly very positive for the Nigerian economy that oil prices are on the rise after dropping to less than $20 per barrel last year and today it is more than $60 per barrel.

“It helps of course the Balance of Payments, in terms of some proceeds, it helps with some tax revenue, but what we have not observed so far is a major increase in oil production. Hopefully, that can also happen going forward based on these higher oil prices,” he explained.

Speaking further, the IMF official stressed that building strong fundamentals could be very helpful in stimulating growth and investments in Nigeria.

He pointed out that having the right macro-policies could help create the fiscal space to mobilise more revenue and promote infrastructure spending.

“But going forward, it will be very important to promote diversification because of the volatility in oil prices. So, Nigeria needs to move away from this paradigm of high volatility to stimulate economic diversification,” he said.

Aisen said there was a need for the federal government to pay attention to Nigeria’s Debt-to-GDP ratio so that it doesn’t become too high.
He stressed the need to ensure that proceeds of funds raised are judiciously utilised.

Aisen confirmed a THISDAY report that officials of the multilateral institution are presently offering advisory to the Federal Inland Revenue Service and the Nigeria Customs Service.

He said: “We send experts to Customs and other areas to Abuja, to meet and to train Nigerian officials and provide them with assistance.

“We also have experts from the IMF in Washington that also come from Abuja. Of course, because of the pandemic, most of these engagements have been happening virtually. “But we take capacity development seriously; it is one of the main pillars of our interaction with our member countries and we are very glad to be able to support Nigeria in its fiscal reforms in general and particularly in tax reforms, including Customs, which is a very important area.”

He reiterated the need for a unification of the various exchange rates in the country,
“For businesses to grow, you need a conducive environment also from a structural perspective. Macro-stability requires structural reform. We believe that private is the main engine for growth in Nigeria,” he added.