Blockchain technology has become a ground breaking advancement in the digital age founded on a decentralized system of interconnected computers and carries the potential to revolutionize many sectors of human endeavour ranging from finance to supply chain management, identity management and Cybersecurity.
Through Blockchain, transactions can be made more transparent, trustworthy and efficient, resulting in greatly reduced operational costs and better user experiences.
This article will be looking at the regulatory framework governing block chain in Nigeria and its components. The Nigerian Federal Government, like its counterparts all over the world, has dedicated a great amount of effort into finding out ways of leveraging Blockchain technology and boost innovation, improve public services, create job opportunities and drive economic growth.
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What is the main regulation governing Blockchain in Nigeria?
The Federal Government promotes the adoption of Blockchain technology in Nigeria through the National Blockchain Policy to improve the quality of services delivered by the public and private sectors, catalyse innovation, create jobs and enhance governance which will grow the economy.
What are the meanings of notable acronyms highlighted in the National Blockchain Policy of Nigeria?
The following acronyms and their meanings are as follows:-
- CBN – The Central Bank of Nigeria
- dApps – Decentralized Applications
- FMC & DE – The Federal Ministry of Communications & Digital Economy
- FSS 2020 – Financial System Strategy 2020
- 5G – Fifth Generation
- NCAIR – The National Centre For Artificial Intelligence & Robotics
- NCC – The Nigerian Communications Commission
- NDEPS – The National Digital Economy Policy & Strategy
- NDPB – The Nigerian Data Protection Bureau
- NITDA – The National Information Technology Development Agency
- NIMC – The National Identity Management Commission
- SEC – The Securities and Exchange Commission
- SIBAN – The Stakeholders In Blockchain Technology Association Of Nigeria
What are the components of a Blockchain architecture as identified in the National Blockchain Policy?
The components of a Blockchain architecture are:-
- A Node :- A system or user within a Blockchain.
- A Block :- A data structure that keeps a set of transactions distributed to all nodes in the network.
- A Miner :- A node that performs block validation and verification functions.
- A Transaction :- The smallest component of a Blockchain system.
- A Chain :- An ordered sequence of blocks in a Blockchain system.
- A Consensus :- A set of rules that govern the operations in a Blockchain system.
What is the background principle of the National Blockchain Policy?
The National Blockchain Policy was founded on the intention of the Federal Government of Nigeria to take advantage of the numerous opportunities that digital technology offers, first leading to the formulation of the National Digital Economy Policy & Strategy (NDEPS) which was launched on February 28,2019 to realign the economy. The NDEPS is anchored on 8 pillars which are :-
- Development Regulation
- Digital Literacy and Skills
- Solid Infrastructure
- Service Infrastructure
- Digital Services Development & Promotion
- Soft Infrastructure & Emerging Technologies
- Digital Society & Emerging Technologies
- Indigenous Content Development & Adoption
What Regulatory Agencies are tasked with implementing the provisions of the National Blockchain Policy?
The National Blockchain Policy is to be directly enforced by the National Information Technology Development Agency (NITDA) and to a lesser extent the Nigerian Data Protection Bureau (NDPB) under the Federal Ministry of Communications & Digital Economy.
Benefits of Blockchain Adoption In Nigeria & Policy Vision/Mission
This article will be looking at the benefits of Blockchain regulatory adoption as well as core components of the Blockchain Policy Vision & Mission in Nigeria
What are the benefits of Blockchain adoption in Nigeria?
- Improved Transparency & Accountability :- Blockchain technology can help to increase transparency and accountability in various sectors in Nigeria. By using a distributed ledger system, all transactions are recorded and can be accessed by anyone on the network. This can help to reduce fraud and other illegal activities.
- Increased Efficiency:- Blockchain technology can also help to improve the efficiency of various processes like payment processing, supply chain management and identity verification. By leveraging Blockchain features like smart contracts, transactions can be executed automatically, reducing the need for intermediaries and streamlining the process.
- Enhanced Security :- Blockchain technology is highly secure due to its decentralized nature. Transactions are recorded on multiple nodes, making it nearly impossible to tamper with the data. This can help protect sensitive data and prevent cyber attacks across multiple sectors of the economy.
- Financial Inclusion:- Blockchain technology can help to increase financial inclusion in Nigeria by providing access to financial services to those who may not have had access before. By using Blockchain-based payment systems, individuals can send and receive money easily & securely.
- Job Creation:- Blockchain has the potential to create significant job opportunities across a range of sectors. With a young and tech-savvy population, Nigeria is well-positioned to become a Blockchain hub in Africa. The adoption of Blockchain technology creates new job roles such as Blockchain developers, Cybersecurity experts and smart contract engineers.
What is the stated vision and mission of the National Blockchain Policy?
Vision :- To create a Blockchain-powered economy that supports secure transactions, data sharing & value exchange between people, businesses and governments, thereby enhancing innovation, trust, growth and prosperity for all.
Mission:- We encourage the use, adoption & integration of Blockchain technology in the various sectors of Nigeria’s digital economy in order to increase economic prosperity, efficiency, innovation, transparency, security & trust.
Policy Direction :- The policy aims to grow domestic talent in Blockchain solutions development, foster innovation and catalyse the adoption & use of Blockchain technology in Nigeria.
What are the focus areas of the National Blockchain Policy?
The policy identifies the following core areas up fully maximize the benefits accruable from Blockchain technology in Nigeria :-
- Talent Development :- The development of talent in the field of Blockchain is critical for the growth and success of the Blockchain industry. This policy seeks to provide talent to support the growth of the industry and to ensure that the National Blockchain Ecosystem has the necessary human capital to drive innovation and growth.
- Innovation :- To facilitate innovation in Blockchain, multiple approaches are needed involving creating an environment that encourages experimentation, providing resources to support innovation and addressing regulatory and legal barriers.
- Blockchain Adoption :- The adoption of Blockchain technology is positioned to spur the continuous development of the digital economy in Nigeria by fostering more secure, transparent, accountable, efficient service delivery and trusted ecosystem. Blockchain adoption in Nigeria will be treated in detail in the next article instalment.
Expected Outcomes Of The National Blockchain Policy Of Nigeria & Its Implementation Structure.
This article will be looking at the expected outcomes of the National Blockchain Policy Of Nigeria and the components of its implementation structure in detail.
These topics will be treated as follows :-
What are the expected outcomes of the National Blockchain Policy considering its focus areas?
Talent Development
– An Increase In The Skilled Blockchain Workforce :- With the implementation of training programmes, education in schools and research funding, there should be an increase in the number of professionals with the necessary skills to work in the Nigerian Blockchain Ecosystem.
– Higher Qualities Of Blockchain Talent :- With a focus on education and research, the Blockchain talent pool would have a higher quality of knowledge and skills, which would help to advance the state of the technology.
– Creation Of New Jobs :- As the Blockchain Ecosystem develops, there will be a need for individuals with specialized skills in areas such as Blockchain solutions development.
– Increased Competitiveness :- With a skilled labour pool, Nigeria will become more competitive in the global Blockchain market, attracting more investments and talents.
– Growth Of The Blockchain Ecosystem :- By investing in talent development, the policy would help to grow the Blockchain ecosystem, with more start-ups, innovative projects and new applications of the technology.
Innovation
- Increased Research & Development :- The policy shall provide funding for Blockchain research and development, which would lead to the creation of new applications, products and services in the digital economy. This policy will benefit from the provisions of the Nigerian Start-up Act.
- Encouragement Of Experimentation :- This policy promotes experimentation with new Blockchain technology, such as smart contracts, decentralized applications (dApps) and interoperability solutions. This experimentation would lead to more innovative and practical use cases for Blockchain.
- Establishment Of Block Sandbox :- The government will establish Blockchain sandboxes, which are environments where companies can experiment with Blockchain technology without the risk of regulatory infractions. This would encourage the development of innovative Blockchain solutions.
- Promotion Of Public Private Partnerships (PPPs) :- By promoting PPPs , the policy shall encourage collaborations between different stakeholders, including start-ups, established companies and government agencies. This collaboration shall lead to more innovative and practical Blockchain solutions.
Adoption
- Increased Blockchain Adoption In The Public Sector :- The policy shall encourage government agencies to adopt Blockchain technology in their operations, such as record-keeping, voting systems, and supply chain management. This would increase the efficiency, transparency and security of the government.
- Increased Adoption & Integration Of Blockchain Technology In Financial Services :- This policy enables improved efficiency, transparency and security in financial transactions. Additionally, the regulatory framework shall ensure that consumers are protected and that the stability of the financial system is maintained.
- Establishment Of Blockchain Standards :- The policy will lead to the establishment of standards for Blockchain technology, including interoperability, security and data privacy. This would provide clarity and consistency for companies developing Blockchain solutions and would help to increase trust in the technology.
- Promotion Of International Blockchain Collaboration :- The policy encourages international collaboration on Blockchain standards and regulations, as well as on the development of cross-border Blockchain solutions. This shall increase the interoperability and adoption of Blockchain technology worldwide.
What are the components of the implementation structure for the National Blockchain Policy?
The Implementation of the National Blockchain Policy requires collaboration between the public and private sectors in Nigeria. The Federal Ministry of Communications & Digital Economy, in collaboration with other relevant ministries will develop a strategy to drive the implementation of the policy. The strategy will outline all relevant stakeholders along with their various roles and responsibilities towards policy implementation in this regard.
To this effect, a national Blockchain implementation and steering committee will be constituted to implement the policy. The following institutions will serve on the committee :-
– The National Information Technology Development Agency (NITDA)
– The Fintech Association Of Nigeria
– The Central Bank of Nigeria (CBN)
– Flutterwave Payments Limited
– Dominion Blockchain Solutions Limited
– Paystack Payments Limited
– The Independent National Electoral Commission (INEC)
– The Federal University of Technology, Akure (FUTA)
– The Federal University of Technology, Minna (FUT Minna)
– The Baze University Blockchain Experience Centre
– The Nigerian Data Protection Bureau (NDPB)
– The Nigerian Communications Commission (NCC)
– The Securities and Exchange Commission (SEC)
– The Nigerian Governors Forum
– The Stakeholders In Blockchain Technology Association Of Nigeria (SIBAN)
A Closer Look At Details Of Blockchain Adoption In Nigeria
Having been previously identified as a core policy focus area, Blockchain adoption involves the passing of regulatory guidelines for its application to varying segments of the Nigerian public and private sectors as espoused by the National Blockchain Policy.
This article will be taking a closer at Blockchain adoption in Nigeria as follows :-
What are the areas approved by the Federal Government of Nigeria for the adoption and application of Blockchain in Nigeria?
- Financial Services :- Blockchain technology has the potential to transform financial services by providing secure, transparent and efficient transactions without the need for intermediaries.
Nigeria recognizes the potential benefits of Blockchain technology and its ability to provide decentralized payment services, particularly with the advent of Cryptocurrencies, which are digital assets designed to designed to work as a medium of exchange of value within the Blockchain. Cryptocurrencies have however been a controversial topic in Nigeria which its definite lack of recognition by the Central Bank of Nigeria (CBN) and at the same time, their endorsement by the Securities and Exchange Commission (SEC) through the creation of a separate set of regulations for digital and virtual assets in Nigeria.
The Chain Analysis Global Crypto Adoption Index 2022 reported that Nigerians have at 32% , the highest per capita Cryptocurrency adoption rate of any country in the world.
- Government & Corporate Digital Services :- Blockchain technology has the potential to transform the way the Nigerian government and businesses operate and deliver services. It offers increased transparency, accountability and efficiency, which can lead to improved trust between citizens and organizations. Furthermore, it can be used in various functions such as :-
a). Identity Management :- In the digital era, there is a growing need for secure and reliable methods of identity verification to prevent fraud and identity theft. By implementing a Blockchain-based identity management system that incorporates device management and tracking, personal IDs, professional credentials and certificates.
b). Land Registration & Record Systems :- In a traditional land registration & record system, the process of transferring ownership can be complicated and time consuming, often involving multiple intermediaries and government agencies apart from concerns about fraud or errors in documentation.
A Blockchain-based land registry would consist of a distributed ledger that records all land transactions and ownership changes. Each transaction would be verified by multiple nodes in the network, ensuring no single party can manipulate the data. This would create an immutable record of ownership that would be difficult to alter without the consensus of the entire network. This will create a more transparent and secure system for recording and verifying property ownership, with little to no human error.
c). Supply Chain Management :- The adoption of Blockchain technology in supply chain management has the potential to significantly enhance transparency and traceability.
The use of Blockchain can provide a decentralized and transparent ledger that enables all stakeholders to access & verify data in real time, helping to reduce fraud and increase accountability.
This will drastically grow the supply chain sector, which will in turn boost the other sectors reliant on supply chain efficiency such as e-commerce, government procurement.
What are the policy statements of the Nigerian government on Blockchain adoption for financial services and Government/Digital Services?
Financial Services
– The government will establish a regulatory framework that enables the integration of Blockchain technology into the financial system while ensuring the protection of consumers & the stability of the financial system.
– The government will 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.
– The government will support the development of Blockchain technology through the provision of funding and incentives to innovators and start-ups in the fintech sector.
– The government will work with industry stakeholders to develop standards for the listing & trading of Cryptocurrencies on regulated exchanges in Nigeria (This has already been done.
Government & Corporate Digital Services
– The government will promote the use of Blockchain technology to improve the efficiency, transparency and security of services rendered to citizens.
– The government will develop a national strategy for Blockchain adoption, which will set out a clear road map for implementing Blockchain in government services.
– The government will promote the adoption of Blockchain in key areas, such as identity management, land registration, supply chain management, intellectual property, and voting systems.
– The government will collaborate with industry and academia to identify new use cases for Blockchain and promote the adoption of Blockchain in rendering government