Nigeria, the most populous nation in Africa, is experiencing a growing interest in digital currencies, driven by economic conditions and the country’s technological resurgence. According to a report from Reuters, Nigeria’s recent surge in crypto usage is a response to the significant devaluation of the naira and soaring inflation rates.
The implications of this trend are substantial, particularly considering Nigeria’s position as Africa’s largest economy. Nigerians are searching for viable alternatives for their financial activities, and cryptocurrencies provide a solution.
Crypto transactions in Nigeria have seen a substantial increase due to the devaluation of the naira. According to a report from New York-based blockchain analytics firm Chainalysis, Nigeria’s cryptocurrency transactions have grown 9% year-over-year, reaching $56.7 billion between July 2022 and June 2023. This growth is also evident in neighboring countries such as Uganda, where crypto usage has skyrocketed by 245% to $1.6 billion. However, Kenya has experienced a decline in crypto adoption, with usage dropping by over 50% to $8.4 billion, according to Reuters.
The surge in Nigeria’s crypto activity coincides with significant economic turbulence, including a substantial drop in the value of the naira in June and July 2023. This financial instability has led many Nigerians to seek refuge in cryptocurrencies, particularly Bitcoin and stablecoins. These digital tokens, especially stablecoins, provide a sense of financial predictability in the volatile world of digital currencies, as their value is anchored to stable assets.
The devaluation of the naira and economic decline are the result of a series of reforms instituted by President Bola Ahmed Tinubu. These reforms included the removal of a widely used petrol subsidy and the lifting of certain exchange rate constraints. Moyo Sodipo, co-founder of the Nigeria-based digital currency exchange Busha, explained that Nigerians are constantly seeking opportunities to hedge against the devaluation of the naira and the persistent economic decline since the COVID-19 pandemic.
It is worth noting that the Nigerian government’s relationship with cryptocurrencies has been tenuous. In 2021, the government banned banks and financial institutions from processing or facilitating cryptocurrency transactions, citing concerns over money laundering, terrorism financing, cybercrime, and the volatility of cryptocurrencies. However, in a seeming change of heart, Nigeria’s Securities and Exchange Commission (SEC) introduced a series of regulations for digital assets in the subsequent year. These regulations, titled “New Rules on Issuance, Offering Platforms, and Custody of Digital Assets,” position these assets under the purview of the SEC as securities. Any exchange dealing in digital assets must obtain clearance from the SEC to operate legally, with associated fees and charges.
Reuters describes this decision as an attempt by Nigeria to strike a balance between a total crypto ban and its widespread use. It is evident that Nigeria’s growing interest in digital currencies is a response to economic conditions and the need for financial stability. As Nigeria continues to navigate the crypto landscape, the implications for its economy and the broader African continent are noteworthy.
– Report from Reuters: https://bitcoinist.com/nigerias-crypto-adoption-continues-to-surge-report/
– Report from Chainalysis: https://bitcoinist.com/nigerias-crypto-adoption-continues-to-surge-report/
– New Rules on Issuance, Offering Platforms and Custody of Digital Assets from Nigeria’s SEC: https://bitcoinist.com/nigerias-crypto-adoption-continues-to-surge-report/
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