The Adoption of Bitcoin and other cryptocurrencies in Nigeria.
Introduction
Bitcoin and other cryptocurrencies gained popularity when the price of Bitcoin, the largest cryptocurrency, increased from $900 in Jan. 2017 to $19,800 by the end of that year. Bitcoin gained more interest around the world and spark up discussions about the future of payment as a digital currency, and Nigeria, being the largest economy and most populated country in Africa, joined the discussion. Bitcoin gained the interest of Nigerians as an easy way to solve payment difficulties.
Bitcoin has acted as a sharp tool for the development of many countries, and Nigeria being a developing country, quickly adopted Bitcoin, most especially the Nigerian youths.
Cryptocurrencies are for sure digital money through which transactions can only be done through the internet. But the developing countries in the developing world have reached the point at which they can deal with cryptocurrencies. These developing countries have adopted such ways and which have acted as a supporting pillar on the journey towards development.
Opportunities through Cryptocurrencies in Nigeria
Nigeria, with a population of over 200 million people, has an unemployment rate of 7.9% and an inflation rate of 12.69% (according to data from Statista), is a developing country that is battling with poverty and the majority of the youths are unemployed. The few ones that are employed are getting a ridiculous salary that can hardly sustain them for a month, with poor treatment from the place of work. Most of those that are employed are living a low standard of living.
The invention of digital assets like Bitcoin and other cryptocurrencies created a whole new industry in Nigeria, majorly among the unemployed youths that are university graduates. The use of internet connection made it easy for crypto transactions to be easy because there are no third parties involved, unlike bank transactions that take a lot of processes to be completed. This increases the use of internet connections in Nigeria and the use of social media has led to the exchange of ideas.
The process of cryptocurrencies and the exchange of money through these cryptocurrencies are easier and cheaper. Many young people became crypto trader overnight, the buying and selling of Bitcoin became a huge business in Nigeria. The youths became self-employed by trading Bitcoin and other cryptos, and also use it to purchase goods from developed countries.
Crypto traders meet on online platforms like Paxful, where buyers and sellers meet to do business transactions on cryptos. Once the agreement is reached on the exchange rate, the seller sends Bitcoin to the buyer’s wallet before the buyer credits the seller’s bank account and place a review. The exchange of Bitcoin on Paxful created an amazing opportunity for Nigerian youths, alleviating most from poverty and enabling them to live a middle standard of living.
Luno is another online platform that enables Nigerians to buy Bitcoin and other cryptocurrencies like Ethereum, Ripple, and Litecoin in naira. This made it easy for Nigerians to buy and hold cryptocurrencies in their Luno wallets.
Binance, one of the largest cryptocurrency trading platform in the world, also made it easy for Nigerians to trade cryptocurrencies by teaching people how to get involved in the crypto market in Nigeria.
Crypto traders make their gain through the spread, the difference between the asking and the bidding price. For example, crypto traders buy Bitcoin from people at the rate of 450 Naira per dollar and sell it for 470 or 480 depending on the current black market rate.
Crypto traders face different challenges as nothing good comes easy. As we all know that the Crypto market is very volatile and prices move quickly. Bitcoin, being the most traded cryptocurrency in Nigeria, gain or lose value from time to time and this affects crypto traders who only buy Bitcoin to sell later at a better rate. Apart from the volatility of Bitcoin, fraud is another major difficulty that crypto traders face in Nigeria. Some fraudsters have seized this opportunity to defraud other people through crypto trading by posing as a legit buyer and running away with people’s Bitcoin.
Nigerians have then device a means to stop this by creating a group of legit crypto traders. All transactions are discussed openly in the group and once the buyer receives the Bitcoin, he or she will notice that the Bitcoin has been received and the naira equivalence at the agreed exchange rate will be sent to the seller, who will notice that the money has been received.
Another means is through referral. Most people prefer this because someone must have put their words out for the crypto trader. A certain level of trust must have been established before a crypto trader can be recommended to someone else.
The need for a reliable and trustworthy crypto exchange platform has also created another industry in Nigeria. Nigerians created apps where Bitcoin can be exchanged for naira with ease and the naira equivalence of the Bitcoin sent will be received into their bank account.
Crypto trading has become a huge industry in Nigeria, data received from @Statisense and @Buycoins revealed that Nigeria has traded $400.1M worth of cryptocurrencies, with most being Bitcoin. A little below Russia and 2X more than the volume of cryptocurrencies traded in China, where Bitcoin is mined.
According to a report on Europeanbusinessreview, the people of Nigeria own the most cryptocurrencies out of the 65 countries in the Statista Global Consumer Survey.
Government Policy axed all cryptocurrencies’ transactions in Nigeria
On Friday, 5th of Feb., the Central of Nigeria sent a memo to all banks, financial and non-financial institutions to stop all crypto-related transactions with immediate effect.
Nigerians reacted to this news as it was a shock to the whole country how the government came to such a sudden conclusion.
@StearsBusiness, an analysis, and deep journalism firm made a long thread on Twitter, explaining in detail the meaning of the policy and how the government came to such a conclusion.
https://twitter.com/StearsBusiness/status/1357753704783478785
Here are some of the reactions of Nigerians on Twitter about crypto ban
“People will move into depression quickly with the inhumane & frustrating move made by CBN to Ban crypto. My uncle just bought 500k Bitcoin last month & Eth worth of 60k yesterday & today CBN is restricting the trade of cryptocurrency.” — @Mohnice_
“I just watched the Video about the crypto ban. The main reason for banning crypto is because they want more dollars to come in, so they feel crypto is “Cutting corners”. The funniest thing is, they actually thought about this and decided that this is the best for the Economy. Ọmọ!” — @FavoredSinner
“So the news I read about this crypto saying that FBI advised the Nigerian government to ban it because of scammers but it’s still used in their country. Sad, I was the one that introduced him to crypto.” — @aemuho
“I really don’t think the ban on cryptocurrency will have a long-lasting downside. People will find brilliant ways around it and the government will regret in the end. Hard times force people to create new ways of doing things. Watch and see…” — @wondaboi6ix
“How can a country see many of their citizens are benefitting from crypto and instead of looking for ways to make it easier to profit from it they just ban it. Their pain is that they can’t tax it.” — @iDumeby
“The underlining reason behind this ban is to check the flow of illicit financial transactions and government, therefore, cannot stop blockchain but they can stop THEIR BANKS from engaging in crypto. Well, this certainly was expected all along.” — @Doctorfrank2
“CBN ban: Binance removes naira from crypto trading pairs.” — @Awomanofpeace
“In just a few days that the CBN issued a memo for the ban of crypto in Nigeria. Bitcoin hits an all-time high of 44k$ and is still rising and someone somewhere will tell me that this country has your interest at heart? E no go better for CBN, Buhari and anybody wey participate.” — @ObedNino
Conclusion
According to the World Bank and the Africa report, 60 million of Nigerian adults do not have bank accounts due to lack of documentation or any other hindrances. The banking system in Nigeria is not that vast and this has made people look into cryptocurrencies to do business transactions.
Although the crypto market is yet to be regulated, people prefer to store their money in cryptos because of the possible increase in price.
The Nigerian naira is losing value at a very rate, therefore, people want a better way to save their money without losing its actual purchasing power. Most people find it hard to open a domiciliary account because of a lack of proper documentation and transfer charges are high when sending money abroad.
Cryptocurrencies have made it easy to send money overseas and to receive money as well without going through so many processes. People also exchange their cryptos at a better exchange rate compared to what the bank gives.
The volume of Bitcoin traded in Nigeria is quite alarming and this has been a major concern for the government. The naira is losing its value and the Federal Reserve Bank is reducing at a fast rate because most people are not saving their money in naira anymore. Nigeria doesn’t have a good reputation when it comes to fraud and money laundry, and with the untraceable transactions in cryptos, the worries of the Central Bank of Nigeria grow. This has been the reason why the sudden ban on crypto transactions in Nigeria.
Featured Image from Shutterstock Price
Tobi Ismail
Tobi is a full time day/swing trader with 3 years’ experience in the currency and commodity market. He is interested in cryptocurrencies in combination to the current financial system. Tobi holds a bachelor’s degree in Agriculture.
