Effect of Cryptocurrency Ban Policy on Unemployment Rate in Nigeria

CHAPTER ONE

INTRODUCTION

 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.

 STATEMENT OF PROBLEM

Cryptocurrencies like Bitcoin, Ethereum, Litecoin, etc has helped the unemployed facilitate small-scale international trade. Crypto enables parties to sell products in exchange for Bitcoin or other cryptos. These features of cryptocurrencies has successfully serve as employment opportunity for unemployed individuals in Nigeria (Nanus 2018). According to Adebisi (2021), the ban on cryto transaction in Nigeria has placed so many reactions, frustrations, mistrust and regret among traders of cryto in Nigeria, as banks blocked all cryto-related accounts, transactions and cryptocurrencies companies in Nigeria are shut down thereby leading to loss of job of hundreds of Nigeria citizens. Hence many Nigeria citizens have returned to their previous unemployed status thereby increasing the unemployment rate. Unemployed citizens however suffers the ugly consequences of unemployment, as meeting their financial needs becomes a hard nut to crack. Thus this study oversees the homogeneous effect of cryptocurrency ban policy on unemployment rate in Nigeria.

PURPOSE OF THE STUDY

The apex grail of this study is to investigate the effect of Cryptocurrency Ban Policy on Unemployment Rate in Nigeria. Other specific objective include;

1. Identify the impact of cryptocurrency on the economy of Nigeria.
2. Investigate the effect of cryptocurrency on the finance need of unemployed Nigeria citizens.
3. Examine the effect of cryptocurrency ban on Nigeria crypto traders.
4. Investigate if cryptocurrency was an opportunity for unemployed Nigerians.

 RESEARCH QUESTION

1. what is the effect of cryptocurrency ban on unemployment rate of Nigeria?

2. what is the impact of crypto on the economy of Nigeria?

3. what is the effect of cryptocurrency on the finance need of unemployed Nigeria citizens?

4. Does the ban of crypto business in Nigeria affect crypto traders?

5. Was cryptocurrency an opportunity for unemployed Nigerians?

 SIGNIFICANCE OF THE STUDY

The findings of this study will in no doubt be of great relevance to the financial regulators, policy formulators, the apex financial institution in Nigeria and the entire Government body as it will apprise them on how the ban of crypto in Nigeria is marful and deteriorating or beneficial to the citizens of the nation and how this policy has contributed to unemployment rate in Nigeria.

This study will as well serve a source guide to researchers and students who would likely carryout further research on a topic similar to the one discussed in this study.

 SCOPE OF THE STUDY

This study will cover the effect of Cryptocurrency Ban Policy on Unemployment Rate in Nigeria. This study is limited to Lagos state residents.

LIMITATIONS OF THE STUDY

The major limitations the researcher encountered while carrying out this research work were insufficient finance, inadequate time and unavailability of relevant materials in this research domain.

 DEFINITION OF TERMS

Cryptocurrency: A cryptocurrency is a digital or virtual currency that is secured by cryptography, which makes it nearly impossible to counterfeit or double-spend. Many cryptocurrencies are decentralized networks based on blockchain technology—a distributed ledger enforced by a disparate network of computers.

Policy: A policy is a deliberate system of principles to guide decisions and achieve rational outcomes. A policy is a statement of intent, and is implemented as a procedure or protocol. Policies are generally adopted by a governance body within an organization

Unemployment: This term is used to refer to individuals who are employable and actively seeking a job but are unable to find a job. Included in this group are those people in the workforce who are working but do not have an appropriate job.