Nigerian payment system needs upgrade to blockchain – Convexity COO
Mr Adedeji Owonibi is a techpreneur, blockchain solutions advocate, digital asset investor and Founder/Operating Director of Convexity. In this interview with FELIX OLOYEDE, he talks about how blockchain can be used to solve some of the challenges facing the country’s payment system
What are the lessons investors should learn for FTX and BlockFi collapse?
Investors should be aware that any exchange they wish to trade on should be regulated in the jurisdiction in which they operate. For example, FTX US is currently going through liquidation issues in the US. It goes through a bankruptcy file and all that order. So what’s going to happen is that at the end of the filing, the people who will be refunded any amount, in real terms, are the FTX US account holders. That is why people in FTX International are leaving people from Nigeria dry. I know people who have lost $400,000, $500,000 and $1 million in FTX. No one is going to reimburse them, because the US regulation does not cover them. Only US citizens shopping on FTX US will be refunded. So they should trade on exchanges that are regulated. And the question is whether any exchange is regulated in Nigeria? No at the moment. So Nigerians should stay away from a crypto investment if they cannot afford to lose their money because if they lose there is no one to call.
Visa and Mastercard have stopped moving into the crypto space after the collapse of FTX and BlockFi. What does this imply?
It implies a bearish sentiment. These are two key players in the global financial sector. They are trying to stop the progress of some of the partnerships they are doing with crypto due to uncertainty. Just this morning (March 8), Silvergate Bank, a major financial services provider to the US crypto sector, collapsed in the US through voluntary liquidation. This in anticipation of the very strict regulation to come. And everyone is cutting deals until they are sure of the regulations they want to deal with in the crypto space.
The crypto market witnessed a bearish run that saw a 46 percent decline in turnover last year. What was responsible for this?
It’s just a normal cycle. We have the bear cycle and the bull cycle. We come from the bull cycle of 2020. That’s what we call the monetary policy of Bitcoin, which halves the supply every four years. The halving occurs every four years. It happened in 2020. The next one is going to happen in 2024. Normally, when it happens, it is followed by a bullish run, which means that there are skyrocketing movements in most digital asset prices. So what happened in 2020, 2021 and 2022 was natural for everyone to panic that they would enter a bearish cycle. And it can take over 18 months or more. We have not yet come out of it. We are still struggling with it until maybe sometime in 2024 when a new cycle comes up. So it was just a matter of trends and cycles.
What is your outlook for the market this year?
This year is very difficult. People are not sure what the atmosphere looks like. Everyone is just struggling to understand what is going to happen. The bearish sentiment, in my view, may continue. People are still wondering where the direction is going. What is going to happen? And just like what happened with Mastercard and Visa, people will take some time to slow down on any crypto. With these collapses, many things have happened. So that’s a lot people would look for.
For me, after the collapse we have and some resilience we’ve seen in 2023 with Bitcoin and Ethereum. This year, Bitcoin has risen to over $24,000 and Ethereum to around $1,006. So since Bitcoin started that year around $17,000 and $1,002 for Ethereum. Both have gone so fast this year. So I think that a lot of people think will eventually take off at the end of the day. There has been a period of capital outflow from the market since April last year. So we’re seeing investors returning to Ethereum and Bitcoin because of the recovery we’ve seen. This year we have seen an injection of over $4.5 billion monthly into the market since February. For the first time in a year, we are seeing more money flowing into these two leading cryptocurrencies, indicating a return of investor confidence.
Recently, Citi Group said that the crypto market has decoupled from the stock market, meaning that when the stock market goes down, so does the crypto. But they now have other lives of their own. So this is really good for people who want to be on the cutting edge of moving into the crypto space. So, the crypto market is somewhat stabilizing, but investors need to keep a close eye on things that can lead to capital inflows and outflows from the market and closely monitor macroeconomic trends such as interest rate hikes, Reserve Bank announcements and other things that can cause volatility in the market.
$5.9 billion was lost to crypto fraud globally, and Nigeria was among the top three African countries that lost the most. What can be done to reduce global crypto fraud?
People need to avoid freebies. We like outrageous returns. We like miracle investments. These were the things that were mentioned in cryptocurrency scams that took place recently. Nigerians should know that something too good to be true is not. For example, someone called me recently, someone called me online that they were going to organize a conference at Eko Hotel, where investors and big banks would come, and promised to give me a speaking slot to talk about my products. But I have to pay $25,000. I said I wasn’t interested. I am not looking for investments. If I’m looking for investment, I’d be the one to go there. So we have to be satisfied and for anything that seems too good to be true, we should just leave it. Let’s work hard for our earnings and the Nigerian mentality of free stuff and doubling money.
There have been many complaints about the failure of BVAS in the just concluded presidential election. What role can blockchain play in ensuring credible elections in Nigeria?
The immutability of blockchain is why we should look at blockchain because we have serious trust issues in this country. Blockchain is the only reliable technology in the world today is blockchain. It’s called the truth machine. It’s easy for you to put something in the blockchain and ensure that no one can change it is the interesting thing about blockchain technology. So that’s what we should look at. Everything you put on the blockchain is visible and no one can come and change it. So I think if we want to change the narrative of our election, we need to adopt blockchain technology for the election. To rig an election with blockchain, you have to hold everyone in the country hostage. To change results means you have to compromise all of us who voted. INEC currently uses traditional technologies, where people can board, update, delete and post. That’s why people complain. With blockchain, you can’t board, update and delete, but you can only enter. Everything you have there will always be there.
What does the current naira crisis say about our digital banking platforms?
The digital banking platforms are not stress tested. You can see that everyone has migrated to the digital payment platform all have problems. It’s like a situation where you have a door that only five people go through and now you have 1,000 people trying to go through the same door at the same time. That’s what we’re witnessing today because everyone moved online and they can’t absorb the traffic. Our payment system needs many upgrades. It needs to be upgraded to the blockchain. NIBSS needs an upgrade to blockchain so that all the banks can easily transfer their loads and it will be easy to make reconciliations between them.
People believe that the naira crisis is a boon for fintech. What is your view on this?
It is supposed to be a boon for fintech. But again, all of them have one central connection point which is NIBSS. Anyone doing financial transactions in Nigeria still connects to NIBSS. Whether fintechs use one million solutions, they still go to the NIBSS gateway to transact. There is still only one central gateway for financial transactions, which is the Nigerian interbank settlement system. And using the traditional technology of payment systems will not work. They need to migrate to a decentralized ledger technology to handle the amount of traffic coming through the system.
