Nigeria has a population of 211 million people, and only 50% of them have a bank account. The internet penetration in Nigeria stood at 50% in January 2021, and only 10-20% of the entire population use a smartphone. The value of the currency, Naira, also dropped by 7.6% against the dollar, and the inflation rate currently sits at 15%. The government wanted to limit the inflation rate to 2%, but it is now increasing at a rate of 3.4%.
Now, why does this all matter? This economic data is more than enough to illustrate how the world lives in two different configurations. More often than not, in a developed country, people take identity, flexible payment systems, and fast internet connections for granted. You can make payments in seconds and do not have to pay 8-15% in transaction fees.
When it comes to a developing country, it is challenging to globalize something new to the crowd. Countries like Nigeria do not have any problems related to race or religion; the problem is the system the people live in. It is fundamentally broken, and no incremental improvements can solve it.
That is when bitcoin makes its entrance and fixes everything for the common citizen. Nigeria is one of the biggest markets in the world in terms of adoption, usage, and trading volume. While the whole world is going crazy about crypto mining, Elon Musk’s tweets, and other trends in the crypto market, bitcoin is changing lives here in Nigeria. In this article, we are going to explore every major aspect of mass adoption in Nigeria and help you understand how the country is healing from the financial crisis using bitcoin.
The financial crisis in Nigeria- How bad is the situation
The government banking system of African countries like Nigeria has always faced difficulties supporting people with means of exchange. They are unable to connect the unconnected and bank the unbanked, but that is not even the biggest problem for citizens of the country.
Corruption is one of the main problems to their economic instability, and according to a report from PriceWaterhouseCoopers, Nigeria could potentially lose 37% percent of its GDP to illegal corruption activities. On top of that, Covid-19 heavily impacted the country, leading to an extended foreign exchange rate crisis. To have a majority share in the European markets for Oil, the government is forced to give high discounts, and at a point in time, they were even selling at negative prices.
High transmission fees are still a major issue in Nigeria, and no traditional bank is giving proper support and assistance to solve problems related to online money transfers. Finding a licensed company for receiving international money is still challenging for a large percentage of the population. Exchange rates are going through the roof right now as the dollar deficiency continues to devalue Naira.
Factors aiding to Massive scale of Bitcoin Adoption
The economic revolution currently taking place in Africa countries like Nigeria is 100% due to the advancements happening in the cryptocurrency space. People are fed up with outdated economic policies and commercial bank-enabled transactions, so they are exploring other options available like bitcoin. But how did they become the global leader in bitcoin adoption and usage? Let’s find out!
Growth in Remittances
People living in first-world economies don’t realize that a big part of income for many African countries like Nigeria is remittances from diaspora abroad. The bitcoin revolution gave people hope that they can get their hard-earned and deserved money without having to pay a hefty tax or fee on it. To give you context on how huge bitcoin is in Nigeria, see the graph below:
In three years, the international money flowing in has decreased significantly, all thanks to the wide adoption of virtual currencies. People are avoiding the 9% cost of transfer by using a bitcoin remittance company. Here is a table to give you an idea of how fast people are adopting bitcoin transfers:
Source- The Reuters
This is no surprise. Countries like Nigeria are facing extreme inflation, leading to the worst economic nightmares for the common man. In one year alone, the Central Bank of Nigeria devalued Naira by 24%, and the suggestion they gave to the citizens was to find alternative income sources.
This is why people in Nigeria turned towards bitcoin payment options and decided to take control of what is rightfully theirs. In a recent survey done by Statista, it was found that the majority of Nigerians either owned or traded cryptocurrencies like bitcoin. For people in countries like Nigeria, bitcoin is a ray of hope, building and sustaining wealth and not falling prey to political instability and hyperinflation.
The regulatory bodies in Nigeria are taking a public stance to support cryptocurrencies and are ready to cooperate with payment companies. In 2020, they released a framework mentioning all the guidelines and how the regulation will be done throughout the country.
SEC acceptance of bitcoin is a big deal, as it opens us various opportunities for businesses to equally collaborate and bring the best products to their citizens. Even though they have not said anything about writing a new law or declaring it as a new asset class, it matters a lot for its citizens, as it gives more assurance when using a bitcoin payment platform.
So why the recent crackdown on Bitcoin?
It is not shocking to see the government of Nigeria crackdown on bitcoin for no good reason, as the money flowing into the country is coming in the form of bitcoin, which is indirectly putting immense pressure on traditional banks.
On 5th Feb, the CBN released a statement, ordering banks to dissolve their operations associated with any cryptocurrency asset. Even though they have highlighted it is not a ban on bitcoin usage, it impacted the market in a big way. People were not able to make deposits. Crypto exchanges like Binance and social payments applications stopped functionality all of a sudden.
The solution? Move to P2P Platform
That is exactly what the citizens of Nigeria did and encourages others to do the same. Traditional banking systems can do whatever they want with your bank account, but no one can hack or steal your funds from your bitcoin wallet. Many blockchain experts and entrepreneurs in this space weighed in and highlighted that the CBN made a mistake sending out a controversial memo.
“The fact that the CBN sent out this controversial memo to banks and other financial institutions without giving the industry participants and stakeholders an opportunity of dialogue shows how little they know about the Nigeria blockchain and cryptocurrency ecosystem,” Chuta said.
After the CBN incident, the P2P trading volumes surged nearly $100 million in a matter of 90 days. Paxful, a global peer-to-peer cryptocurrency trading platform, recorded $1.5 billion in trading volume despite hearing the news about a possible ban.
People outside Nigeria might think, the government cracking down on bitcoin is a deterrent for the whole community. Still, it is only a confirmation that the traditional banking system cannot do anything to stop bitcoin usage for the citizens of the country.
Bitcoin will change Nigeria’s Future- this is what they are not telling you
You might think Bitcoin is the only innovation adopted by Nigeria at such a large scale, but that is not the case- they are also leading in mass technology usage. The most surprising part is that they accept new technologies at a high rate than other developing countries are unwilling to do.
Nigeria will lead in this bitcoin revolution, and it is mainly going to be because of the country’s youth. Many blockchain experts and analysts who went to Nigeria for research purposes repeatedly mention how fast the younger generation is implementing every new technological development.
Many visionaries like Jack Dorsey are trying to do their bit in helping Nigeria become successful with its bitcoin adoption. Even when there is no support coming from any direction, we see many young Nigerians finding alternative ways to buy or sell cryptocurrencies.
The government is scared and is only trying to intimidate its citizens, and it will not work. No news can faze the people of Nigeria, as they all focus on one goal only, and that is- economic freedom. Read the below quote, and you will understand how powerful bitcoin has become-
“ In Jan 2020, foreign currencies coming into Nigeria was at 2.5 billion and by September, it fell to 55 million. A 98.7% decrease in the amount of foreign money coming in but it was a 98.7% increase in bitcoin being used as a cryptocurrencies”, said Ray Youssef at Bitcoin Miami 2021.
The data is still not available for this year, so it will be even higher in every aspect. Nigeria’s government cannot do anything when such a big drop in foreign money takes place. They are trying to shake off some investors by releasing controversial statements. In the end, bitcoin is not going anywhere, and it is only going to keep getting better and prove to government institutions how imperfect their system is in reality.
Top 3 Crypto Exchanges in Nigeria
Serving more than 300,000 people every day, Patricia is well known for its financial infrastructure, digital payment solutions, and global E-commerce. This is a reliable platform for Nigerians to buy/sell bitcoin of any value. One can even send gift cards using this exchange. It also supports multiple assets, making it easy for people to switch between everyday transactions.
A cross-platform crypto exchange supporting web, iOS, and Android is Luno. It was founded in 2013, and since then, it has recorded $21 billion in processed transactions and 5M+ downloads on Play Store. The application also offers users to stake their crypto and earn up to 7.6% APY. It also does not charge any Maker trading fee.
Instant trading features and zero transaction fees are two main features that stand out in the case of Buycoins Africa. Few reviews also suggest they provide excellent customer service with no wait time. Users are also given an option to lock up their crypto savings and earn an annual interest of 12%.
Should the Nigerian government pursue a bitcoin standard?
With the absence of bitcoin, Nigeria will not be able to climb back up and achieve economic independence. It is just not possible with the current economic climate in the country. In a recent letter written by Rusell Okung, he created a sense of urgency for the government to pursue the bitcoin standard and help reshape the economy.
Mr. Russell also mentions that the government needs no agreement with a corporation to allow bitcoin to impact humanity as a whole, but they do need to allocate national resources to help facilitate getting to the next level.
As bitcoin is limited in supply, the importance of fast-tracking the process is huge, and other countries like China and Iran are fully participating in many activities like Mining, so it is crucial to not be left behind.
In the letter, Russell emphasizes this as a once-in-a-lifetime opportunity to claim global prominence. He gives an example of El Salvador and wants Nigeria to lead the next global financial shift.
If we take a look at the adoption plan drafted by the government, we can see that there are still many unfinished blockchain attributes. The potential for using blockchain is limitless. It can result in a cashless economy and empower citizens with financial literacy. While the climb may take a significant amount of time, it starts by taking the first step. That first step for Nigeria would be to pursue bitcoin as a standard.
People think Nigeria has a bad rap and is full of scammers, but in reality, it is one of the most fast-moving countries in the world. With the youth coming to the forefront and taking charge of cryptocurrency payments, the country finds it easy to adapt and evolve with bitcoin. Nigeria’s economy will survive if the mass adoption continues to increase, or else inflation will keep causing more and more problems for the common man. It is going to take time. It is going to take a collaborative effort to make it happen, but at the rate we are evolving in this industry, Nigeria could be the first successful case study that we may read in the history books.
Born and brought up in India, Karthikeya Gutta is a crypto journalist and freelance contributor for ItsBlockchain. He covers various aspects of the industry with in-depth analysis and research. His passion towards blockchain and crypto ecosystem is mainly because he believes it can really change the world and help millions of people.
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