EFFECT OF CRYPTOCURRENCY BAN POLICY ON UNEMPLOYMENT RATE IN NIGERIA

EFFECT OF CRYPTOCURRENCY BAN POLICY ON UNEMPLOYMENT RATE IN NIGERIA

BACKGROUND OF STUDY

The global financial system is no doubt embracing the current transition from physical currency to almost virtual currencies through the medium of technology. This wave has ushered in the birth of crypto currencies. In the light of this outbreak, there has been a lot of positive and negative discourse on the value of crypto-currencies to the Nigerian fiscal system. Investors have in their masses invested in crypto currencies, the most common being Bitcoins all in a bid to some sort of recoup interests in the nearest future. Economics research to this point has furnished little perception into the economic relevance of cryptocurrencies. Most current model of cryptocurrencies are built by Computer scientists who mainly focus at the feasibility and security of those systems. Such considerations, however, are pivotal for understanding the optimal layout and, hence, the financial price of cryptocurrency as a means of payment.

According to Nakamoto (2008), cryptocurrency is a peer-to-peer Electronic Cash System. The peer-to-peer system of cryptocurrency is built on blockchain, thus, allowing transactions to take place between users directly, without any intermediary (Hameed & Farooq 2016; Grech, & Camilleri, 2017). It allows anonymous transaction between parties and as such, parties do not know the true identity of each other (Dierksmeier & Seele, 2016). This may be necessary because, the entire details of the transaction of every participant on the cryptocurrency blockchain is publicly revealed to other users (Bech & Garratt, 2017). Unlike the traditional currency which is issued at interval determinable by the Central Bank of each country, cryptocurrency like bitcion are mined at a fixed issuance algorithm such that the number of Bitcoins to be mined is halved every year.

Although the use of cryptocurrency as a basic money account is aimed at granting all people the right to a verifiable internet identity (Johnston, 2002), there are lots of speculations around its future. Despite the risks associated with this currency, the rate of its growth is astonishingly benevolence and challenging. With its growth, Governments are thrown into dilemma. However the overwhelming benefits of cryptocurrencies has at as when accessible serve as a source for meeting the daily financial needs of masses with no positive employment status and those who suffered unemployment.

Unemployment is one of the developmental problems currently facing all developing economies of the world (Patterson et al, 2006), and Nigeria is not an exception. Unemployment or joblessness occurs when people are without jobs and they have actively sought work within the past five weeks (International Labour Organization, 1982; Fajana, 2000). Though unemployment occurs to people of all categories but its effect has bitten more sarcastically hard on the youth. Unemployment is a global challenge, but worse in developing countries of the world, with attendant social, economic, political, and psychological consequences. It contributes to low GDP and leads to increase in crime and violence, psychological effect, adverse effect on health and political instability (Njoku & Ihugba, 2011). Unemployment in not a recent challenge in Nigeria as the national unemployment rate rose from 4.3 per cent in 1970 to 6.4 per cent in 1980 and have ever since increased.

Nigeria, the largest economy in Africa, has been unable to efficiently tackle its increasing unemployment rate – a ticking time bomb, if not addressed quickly. In 2020, the frontier market witnessed a rise in its unemployment rate, due to an ever-growing dependent population, reduction in the total output of goods and services, and the unprecedented COVID-19 pandemic, which negatively impacted the economy and led to job loss for thousands of Nigerians.

Such unimpressive economic data was however managed, since the financial benevolence of cryptocurrencies was overwhelming it triggered a massive engagement of Nigerians. Many unemployed Nigerians can utilized the tools behind crypto and blockchain to generate income, as traditional jobs steadily become outdated. “Since the adoption of cryptocurrency in Africa, Nigeria has become a major hot zone in the African cryptocurrency space. The adoption of blockchain/cryptocurrency by Nigerians, has been able to give jobs to young Nigerians (Chike Okonkwo 2020).

Relatively, the Nigeria government has placed a ban on cryptocurrency on on Feb. 5, 2021. In light of Nigeria’s efforts to advance its digital economy agenda, the crypto decision seems counterproductive and reactive. While the crypto ban has led to an initial chill, with banks closing accounts of some owners with their funds, this policy has led to loss of jobs as cryptocurrency companies in Nigeria were shot-down and the traders unable to perform transactions.

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