Interest in digital currencies is growing in Nigeria, Africa’s most populous country. According to a report, the recent surge in cryptocurrency usage in Nigeria can be attributed to economic conditions and the country’s youth-driven tech renaissance.
The impact of this growth trend cannot be underestimated, especially given Nigeria’s status as Africa’s largest economy. With the Naira devaluing significantly and inflation soaring, Nigerians are looking for viable alternatives for their financial activities.
Naira depreciation leads to surge in cryptocurrency trading
According to a report by New York-based blockchain analysis firm Chainaanalysis, Nigeria’s cryptocurrency trading volume increased by 9% year-on-year, reaching $56.7 billion between July 2022 and June 2023.
Neighboring countries have seen similar growth in digital asset adoption: Cryptocurrency usage in Uganda surged 245% to $1.6 billion. The story is different in Kenya, where cryptocurrency adoption has plummeted, with usage plummeting by more than 50% to $8.4 billion, Reuters reported.
The increase in cryptocurrency activity in Nigeria coincides with severe economic turmoil. Notably, the value of the naira fell significantly in June and July 2023. This financial instability has prompted many Nigerians to turn to Bitcoin and stablecoins.
These digital tokens, especially stablecoins, have their value anchored in a stable asset, providing financial predictability amid the wild swings common in the digital currency world.
Presidential Reforms and Cryptocurrency Regulation
According to Reuters, the naira’s plunge to historic lows can be traced to a series of bold measures taken by President Bola Ahmed Tinubu. Some of the most significant changes include the elimination of widespread gasoline subsidies and the lifting of certain exchange rate restrictions.
Moyo Sodipo, co-founder of Nigerian digital currency exchange Busha, shed light on the sentiment, saying:
People are constantly looking for opportunities to hedge against the depreciation of the naira and the continued economic downturn since the coronavirus pandemic.
However, it is worth noting that the Nigerian government’s relationship with cryptocurrencies has always been tenuous. In 2021, the country’s government banned banks and financial institutions from processing or facilitating cryptocurrency transactions.
The ban was imposed because Concerns about money laundering, terrorism financing, cybercrime and cryptocurrency volatility. However, the Nigeria Securities and Exchange Commission (SEC) appeared to have changed its mind and introduced a series of regulations targeting digital assets over the following year.
The title is “New Rules for Digital Asset Issuance, Platform Provision and Custody” On its official website, the rules are detailed in a 54-page regulatory structure for digital asset issuance and custody. The guidance places these assets as securities within the SEC’s jurisdiction.
The China Securities Regulatory Commission has made it clear that any exchange engaging in digital asset trading must first obtain its “no objection” license before operating legally. In addition, the registration fee for these exchanges is 30 million naira (equivalent to $72,289) and other related fees.
Reuters described the decision as Nigeria’s attempt to strike a balance between a blanket ban on cryptocurrencies and their rampant use.
Featured image from iStock, chart from TradingView