OP-ED: Crypto adoption in Nigeria keeps chugging along

Nigerian business and tech journalist Adegoke Oyeniyi reflects on the dynamics of crypto adoption in Nigeria.

OP-ED: Crypto adoption in Nigeria keeps chugging along
Photo by Oyemike Princewill / Unsplash

Sometime in June 2019, just before the Covid year, I registered on Buycoins and acquired my first crypto asset. The crypto revolution was seemingly taking off and I didn’t want to be left out. But with all the alarming cryptocurrency devaluations going on and stiff regulations against digital assets, the excitement isn’t as high anymore.

Bitcoin has dropped from highs of over $68,000 in November 2021 to just above $20,000 in June 2022. This takes it back to early 2021 levels of just under $30,000. Meanwhile, the total crypto industry market cap has eased to under $1 trillion for the first time since Jan 2021.

Despite these ups and downs, I have no doubts that crypto, and maybe Web3 – an idea for a new iteration of the World Wide Web-based on blockchain technology – are the future in Africa. This is because the astronomical growth cryptocurrency has witnessed on the continent is driven by fast, cheap, and stress-free cross-border transfers and remittances, which – according to Chainalysis, make up 96% of Africa’s cryptocurrency transaction volumes.

For example, remittances to Africa via Western Union cost at least a digit in the percentage of the total amount sent. On crypto exchanges, they cost a few decimals in percentages and the transaction is as instant as a text message. Viola!

Fundamentally, it’s a better option. It’s no surprise that official remittances, according to a World Bank report, from the diaspora into Nigeria between 2019 and 2020 fell by nearly 35% to $17bn as Nigerians pivoted to crypto.

Understandably, Nigeria’s Central Bank as well as most African countries’ apex banks aren’t pleased about this trend within their economies. Crucial multi-billion dollar inflows that their economies depend on, and on which they have statutory oversight, are plummeting and being diverted into a financial system over which they have little understanding.

As regulators, they rightly should be concerned as they are losing control and oversight over billions of dollars flowing through their jurisdiction; some of which are suspected end up with terrorist organisations. Yet, responses from regulators such as Kenya and Nigeria’s apex banks of placing a ban on using fiat to purchase crypto directly from bank accounts to make crypto trading difficult has not deterred growth in the sector.

Chainalysis quoted Artur Schaback, COO and Co-founder of leading P2P exchange Paxful, as saying that Paxful experienced 57% growth in Nigeria and 300% growth in Kenya over the last year, 2019. Before the ban by the central bank of Nigeria, Nigerians traded bitcoin volumes worth about $180 million on the platform. After the ban, the numbers have gone above $225 million. WHY?

The rise is a consistent trend with many leading crypto players. This rise also has been largely peer-to-peer, driven by numerous economic and financial use cases of crypto for savings and investment to hedge against constantly rising inflation across Africa.

Necessity, Plato said, is the mother of all inventions. As long as the economic fundamentals of African economies are weak and currencies continue to lose ground against the dollar, for example, people will seek out ways to preserve their capital irrespective of the regulatory restrictions.

I know crypto traders who have made outsized returns of 10 times in the last four years. Even Elon Musk’s Tesla has not given this kind of mouth-watering return to shareholders within the same timeframe. I guess this perfectly explains the case of the rising blockchain and cryptocurrency adoption in Africa, as the need for survival amid harsh economic realities compels innovation.

Recently, this reward has been threatened by an across-board depreciation of crypto assets driven global market forces. It, however, remains to be seen whether this devaluation will carry on having an impact on the continued growth of cryptocurrency on the continent.

Editorial Disclaimer: The article is part of a Web3 education opinion editorial series resourced by the Celo Community Fund. Opinions expressed by the author do not necessarily reflect the views of the African Tech Roundup or the Celo Community Fund.

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