Cryptocurrency trading and adoption in Africa’s most populous country, Nigeria, has had its fair share of ups and downs. However, a recurrent pattern that has been established over the years is that the country’s populace and retail crypto trading cannot be separated, despite the regulatory hurdles the nascent technology continues to face in the country.
According to a report which was published by blockchain research firm Chainalysis yesterday, crypto usage and adoption continue to grow. The report says Nigeria’s volume of crypto transactions grew 9% year-over-year to $56.7 billion between July 2022 and June 2023.
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The report is revelatory because, considering the economic problems like inflation and currency devaluation that the country continues to grapple with, achieving such milestones within such circumstances is impressive.
More on the Chainalysis report
According to the report by the New York-based firm, Nigeria’s volume of crypto transactions experienced a 9% year-over-year growth, surging to a total of $56.7 billion during the period spanning July 2022 to June 2023.
Another African country, Uganda, also saw remarkable growth within the same timeframe. The eastern African country recorded a 245% increase in crypto transactions within the period of July 2022 to June 2023.
On the flip side, Kenya recorded a drop in crypto transactions. Cryptocurrency usage dropped by over 50% to $8.4 billion, per the report.
Why the rise in Nigeria’s crypto transactions?
It is no longer news that Nigeria has faced economic crises which have plagued the country’s stability, especially in the past 12 months. However, Chainalysis says these challenges are some of the catalysts that propelled the adoption growth.
According to the research company, the interest in Bitcoin and stablecoins, which are digital currencies pegged to the United States dollar to prevent volatility, went on an astronomical rise when the local currency (naira) witnessed sharp declines.
According to Moyo Sodipo, Cofounder of Busha, a Nigerian crypto exchange who spoke to Chainalysis:
“People are constantly looking for opportunities to hedge against the devaluation of the naira and the persistent economic decline since COVID.”
Also, as Nigeria continues to struggle with widespread unemployment, poverty and brain drain, its populace, especially the younger demographic that is largely tech-savvy, has seen crypto trading and usage as a means of living. Thereby contributing to the surge.
Peer-to-peer trading platforms have also been helpful in this regard. They’ve allowed crypto enthusiasts to mitigate the impact of the banking sector ban on crypto transactions.
Crypto regulation in Nigeria
Despite the ban imposed by the Central Bank of Nigeria (CBN) in February 2021, the country has seen a relentless surge in crypto transactions. And now, there’s a growing consensus that lifting it could bring substantial benefits to both the government and its tech-savvy citizens.
Lifting the crypto ban could stimulate economic growth in Nigeria. Cryptocurrencies offer a new avenue for investment, entrepreneurship, and job creation.
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Nigerian startups in the crypto and blockchain space have shown tremendous potential. By allowing this industry to flourish, the government could foster innovation and attract foreign investment, ultimately bolstering the country’s economy.
The Nigerian government is in need of new revenue streams, and the crypto sector could provide just that. By regulating and taxing cryptocurrency transactions, the government could generate substantial revenue. This could be used to fund vital public services and infrastructure development.
The ban on cryptocurrencies has discouraged local innovation in the tech sector. By allowing cryptocurrency businesses to operate legally, Nigeria can nurture a vibrant tech ecosystem. This would not only attract talent but also encourage the development of blockchain solutions for various sectors, from healthcare to agriculture.
While concerns about cryptocurrency’s potential misuse for illegal activities persist, a well-regulated crypto ecosystem could mitigate these risks. It’s essential for the Nigerian government to strike a balance between ensuring financial stability and harnessing the enormous potential that cryptocurrencies offer.