Another Low For Venezuela, A Lesson For Nigeria

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February 12, 2019 by
Another Low For Venezuela, A Lesson For Nigeria

The growing reputation of Venezuela as a socio-political and economically unstable nation seems to be continuing as its government turns to cryptocurrencies in a latest attack.

Since the country’s national currency became almost worthless as a medium of exchange, Bitcoin and cryptocurrency in general provided an escape route for most of its citizens. To an extent, a lot of people considered Venezuela to provide an ideal use-case scenario for cryptocurrencies.

The initiation and eventual launch of a state owned cryptocurrency in 2018 further buttressed the anticipation of many, although deeper analysis suggested a more political undertone to the development at the time.

Another Unfavourable Policy For Crypto Users

While the country continues in its political ups and downs, and the battle for international recognition by the two parallel governments, the incumbent Nicholas Maduro government has decided that its next reform victim will be the cryptocurrency ecosystem.

A new policy as announced by the country’s official gazette, issue No. 41581 obliges senders of remittances to pay up to a maximum of 15% tax, in favour of the Venezuelan National Superintendence of Crypto Assets and Related Activities (SUNCRIP).

Furthermore, the decree empowers SUNCRIP to set transaction limits in addition to arbitrarily levying transaction tariffs of up to 15 percent. This has been followed by an immediate implementation by SUNCRIP as a monthly limit of $600 USD has been set establishment for citizens of the country. This implies that by exceeding this limit, a sender will require permission from SUNCRIP up to a hard limit of the value 50 units of the nation’s Petro cryptocurrency ($3,000).

More of Politics, Less of Economics

This development is seen from several quarters to be more of a political strategy by Maduro’s government to not only control the economies of its citizens but also an indirect way to fund his embattled government.

How this move affects the country’s official fiat currency, the Bolivar leaves a lot of questions to be answered. It is now only normal to assume that President Maduro and his government have given up on the Bolivar, or at least have no near term plans of reviving the nation’s internationally recognized official currency.

It can be recalled that in August 2018, President Maduro carried out what was recorded as the greatest currency devaluation in history. The Bolivar was plunged to a devaluation tune of around 95 percent. The decision further pushed the economic inflation in the country towards the already forecasted economic doom, forcing citizens to stomach more hardship.

For those who could afford it, Bitcoin and other cryptocurrencies have been a sustaining tool, helping them to maintain a considerable level playing field with neighbouring countries in terms of exchange and remittances. Making it difficult to use this medium can be seen as a deliberate dictatorial effort by Maduro’s government to clampdown on the masses in his battle to retain power.

A Lesson To Be Learned By All

Venezuela is South America’s highest producer of crude oil and only few years ago was used as an example for other oil producing nations in terms of positive developments. Although while Maduro’s predecessor, Hugo Chavez ruled the nation, his economic management style was criticized by many and predicted to backfire. That prediction did not take long to come to pass.

A crumbling economy, coupled with an unstable political environment has formed a perfect recipe for a nation in turmoil. This serves as a warning for developing nations whose government neglect the real fundamentals of economic growth while toying with internal political systems.

With a rising debt profile and a delicately balanced political system, the largest black nation of the world, Nigeria needs to watch her steps in order to avoid a similar slide into anarchy.

Like Venezuela, Nigeria is the largest producer of oil in its own continent, Africa. It cannot be said that the nation’s oil sector has been managed in the most appropriate manner. However, the danger for such nations comes at the point when oil and power mixes.

The situation in Nigeria is not even near as bad as that of Venezuela in terms of an economic meltdown. The present concern is the upcoming general elections which so far remains the most keenly contested election in the history of the country.

With various accusations and counter accusations between the two largest political parties in the country over attempts to manipulate the process, one would expect the election process to go the whole nine yards.

All eyes are on Nigeria right now, hoping that every stakeholder in the process does the right thing. Beyond that, it is also expected that whoever loses the election between the two front-runners, accepts defeat like a fair sportsman. Anything other than this might see another Venezuela unfolding.

Considering the strategic position of the largest black nation in the world in so many ways, everyone seems to be interested in the aftermath of the contest between President Muhammadu Buhari and Former Vice President Atiku Abubakar.

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