The Ever-Expanding Crypto Market in Nigeria

Regulators in Nigeria have made an effort to restrict the use of cryptocurrencies. 

Some time has passed since then, and now it’s quite apparent that their efforts have been fruitless. However, individuals will still resort to crypto in times of economic hardship, as shown by the country.

It was instructed that banks identify individuals and/or organizations who were conducting crypto transactions or operating crypto exchanges and guarantee that such accounts are terminated promptly by Nigeria’s Central Bank in February 2021. 

However, the prohibition had little effect on the popularity of bitcoin in Nigeria. P2P (peer-to-peer) transactions, or transferring money directly to one another, have become popular within the crypto community.

For the years 2020 and 2021, the dollar amount of crypto acquired by Nigerian consumers is expected to increase regularly, which may be linked to the current bull market. 

For the first time since last December, Nigeria got more than twice as much crypto as it did then: $2.4 billion.

Despite the limitations that come with geographic data, it’s obvious that bitcoin is thriving in Nigeria.

Nigerians, according to a Statista poll conducted in March, utilize cryptocurrency at a rate of 32%. According to Chainalysis’ global cryptocurrency adoption forecast for 2020, Nigeria is also the ninth most popular cryptocurrency destination.

Last autumn, interest in crypto soared when protesters with the “EndSARS” campaign in Nigeria raised money using bitcoin to protest police brutality.

Adoption seems to be influenced by economic considerations as well.

Nigeria’s currency, the naira, is depreciating due to the country’s 18% inflation rate in 2021.

Despite the fact that US dollars are difficult to come by in Nigeria, bitcoin may act as a substitute for the US currency and protect users from the naira’s inflation.

Nigerians import most of their products. Therefore, U.S. dollars are in great demand and often unavailable on the market.

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According to Keith Mali Chung, president and co-founder of African blockchain company Loopblock Network, several Nigerian importers have already converted to crypto as a payment mechanism.

He went on to say:

“Over 70% of Nigerian consumption is imported, and because of the country’s financial constraints, bitcoin is getting the attention it deserves.

Cryptocurrency is being used by Chinese merchants selling clothes and gadgets in Nigeria.”

Chinese merchants may be moving tens of millions of dollars in cryptocurrency over the border every day, as is the case in Eastern Europe.

Chung admits it’s difficult to determine how much money is flowing this way from Nigeria to China, but he does have some anecdotal evidence to back him up.

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The yield farming industry is booming

Because of the epidemic, some young Nigerians are turning to bitcoin and other newer cryptocurrencies as a means to supplement their meager salaries.

The decentralized finance sector is now benefiting a large number of individuals, providing equal financial possibilities for everyone, regardless of country or any other considerations.

The yield farming industry is booming, and several of my friends have taken out DeFi loans to fund their ventures.

When it comes to the popularity of cryptocurrency in Nigeria, Ray Youssef, CEO of Paxful, thinks that the main reason has been: Nigeria’s youthful fervor and entrepreneurialism. A spirit of innovation and self-reliance is ingrained in them.

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Nigeria’s reality remains difficult for certain crypto companies operating there.

Nigerians have not been outspoken in their opposition to cryptocurrencies, as shown by the Central Bank of Nigeria.

At a March public event, deputy governor of the central bank Adamu Lamtek commented on the contentious banking restriction, saying that the regulator had never outlawed cryptocurrency activities in Nigeria completely; rather, it simply barred banking services for cryptocurrency companies. Lamtek added.

Despite this, Nigeria’s reality remains difficult for certain crypto companies operating there.

Since February, Luno, the digital currency wallet owned by Digital Currency Group (also the parent company of CoinDesk), has blocked fiat deposits and withdrawals, its CEO Marcus Swanepoel stated recently.

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Despite the fact that the business was able to unfreeze its Nigerian bank account in June, Swanepoel stated that customers were still unable to transfer fiat money to and from the site and that the company has “intensified regulatory lobbying” to resolve the problem.

Chike Okonkwo, a member of the Stakeholders in Blockchain Technology Association of Nigeria (SiBAN) and asset management Thresh0ld’s Africa sales and partnerships head, said the crypto community has attempted to contact the central bank but has not received a response.

Sibiya claims that SiBAN has been working with authorities for some time in conjunction with two other groups, Blockchain Nigeria User Group and Cryptography Development Initiative of Nigeria.

Although Okonkwo claimed he had been talking with the [Securities and Exchange Commission] before the CBN ban news broke, the SEC was forced to put their own plans on hold as a result of the CBN’s actions, the economist added.

Peer-to-Peer P2P Platform Proliferation

Pile of gold bitcoin money

Nigeria’s crypto community has also discovered methods to circumvent official prohibitions.

Nigerians transferred even more bank wires to buy bitcoin after the Central Bank of Nigeria prohibited crypto-related bank transactions in February, according to Paxful’s Youssef. 

When it comes to the number of transactions financed using bank transfers in Nigeria, Paxful is on track to have a 23 percent increase over the previous year.

According to Paxful, Nigeria is the company’s biggest market, with 1.5 million users and a trading volume of over $1.5 billion.

According to UsefulTulips, Nigerian P2P networks Paxful and LocalBitcoins had the highest volumes in Africa in the first half of 2021, totaling over $200 million.

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According to LocalBitcoins’ chief marketing officer, Jukka Blomberg, Nigerians transacted 50 percent more than they did during the same time last year on LocalBitcoins. 

He also noted that the number of new registrations on the platform has risen this year.

P2P transactions are difficult for government authorities to track, which may explain some of this activity.

In the absence of a third party, it is difficult to determine how an individual spent his or her money when it was sent straight from one personal account to another. It may be to pay back a buddy for money they owe them, bitcoin they bought from someone, or rent on their flat.

For banks, it would be very difficult, if not impossible, to comply “Close such accounts immediately, as directed by the Central Bank of Nigeria.

According to Yele Bademosi, CEO of the Africa-focused crypto app Bundle, switching to peer-to-peer transactions may potentially strengthen and strengthen the Nigerian crypto ecosystem.

Conclusion

Cryptocurrency is thriving in Nigeria, according to a Statista poll conducted in March. 

For the first time since last December, Nigeria got more than twice as much crypto as it did then: $2.4 billion. P2P (peer-to-peer) transactions, or transferring money directly to one another, have become popular within the crypto community. 

Cryptocurrency is booming in Nigeria, and some young Nigerians are turning to bitcoin and other newer cryptocurrencies as a means to supplement their meager salaries. 

Since February, Luno, the digital currency wallet owned by Digital Currency Group (also the parent company of CoinDesk), has blocked fiat deposits and withdrawals.

Nigerian P2P networks Paxful and LocalBitcoins had the highest volumes in Africa in the first half of 2021, totaling over $200 million. 

The number of transactions financed using bank transfers in Nigeria is “on track” to have a 23 percent increase over the previous year.

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