Nigeria, Africa’s most populous nation, has witnessed a burgeoning interest in digital currencies. According to a report, Nigeria’s recent spike in crypto usage can be attributed to economic conditions and the nation’s youth-driven technological resurgence.
The implications of this growing trend can’t be understated, especially considering Nigeria’s position as Africa’s largest economy. Nigerians are seeking viable alternatives for their financial activities, with the naira experiencing significant devaluation and inflation rates soaring.
Crypto Transactions Surge Amid Naira Devaluation
According to a New York-based blockchain analytics firm Chainalysis report, Nigeria’s cryptocurrency transactions swelled 9% year-over-year, reaching $56.7 billion between July 2022 and June 2023.
This growth in digital asset adoption is similar in neighboring countries: Uganda saw its crypto usage skyrocket by 245% to $1.6 billion. In Kenya, the situation is different as the country experienced a sharp decline in crypto adoption, with its usage plummeting by over 50% to $8.4 billion, according to Reuters.
This uptick in Nigeria’s crypto activity coincides with significant economic turbulence. Notably, the naira’s value dropped considerably in June and July 2023. Such financial instability has pushed many Nigerians towards Bitcoin and stablecoins.
These digital tokens, especially stablecoins, have their value anchored to stable assets, offering a semblance of financial predictability amid the wild fluctuations common to the digital currency world.
Presidential Reforms And Cryptocurrency Regulation
According to Reuters, the naira’s dive to record lows can be traced back to a series of bold measures instituted by President Bola Ahmed Tinubu. Some of the most significant changes involved the removal of a widely used petrol subsidy and lifting of certain exchange rate constraints.
Moyo Sodipo, co-founder of the Nigeria-based digital currency exchange Busha, elucidated the populace’s sentiment, stating:
People are constantly looking for opportunities to hedge against the devaluation of the naira and the persistent economic decline since COVID.
However, it’s worth noting that the Nigerian government’s relationship with cryptocurrencies has been tenuous. In 2021, the country’s government banned banks and financial institutions from processing or facilitating cryptocurrency transactions.
The ban was imposed, citing concerns over money laundering, terrorism financing, cybercrime, and the volatility of cryptocurrencies. Yet, in a seeming change of heart, Nigeria’s Securities and Exchange Commission (SEC) rolled out a series of regulations for digital assets in the subsequent year.
Titled the “New Rules on Issuance, Offering Platforms and Custody of Digital Assets” on its official site, the rule is detailed in a 54-page regulation structure for digital asset launches and safekeeping. This guideline positions these assets under the purview of the SEC as securities.
The commission has clearly stated that any exchange dealing in digital assets must first obtain a clearance of “no objection” from them to operate legally. Moreover, these exchanges have a registered fee of 30 million naira (equivalent to $72,289) and other associated charges.
Reuters describes this decision as an attempt by Nigeria to strike a balance between a total crypto ban and its rampant use.
Featured image from iStock, Chart from TradingView
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