Nigeria, one of the countries in African, is currently witnessing a significant upsurge in the adoption of cryptocurrencies.
This surge in the use of digital currencies can be attributed to various economic factors and the tech-savvy younger population in the country. The implications of this trend are substantial, given that Nigeria boasts the largest economy on the continent.
As the Nigerian naira experiences significant devaluation and a sharp rise in inflation rates, the people of Nigeria are actively seeking alternative avenues for their financial transactions.
Crypto Adoption in Nigeria
According to a recent report from New York-based blockchain analytics company Chainalysis, crypto transactions in Nigeria have seen a year-on-year growth of 9 percent, reaching a total of $56.7 billion between July 2022 and June 2023.
Bitcoinist also reports that this remarkable surge extends beyond Nigeria, as neighboring countries like Uganda have experienced an astonishing 245 percent increase in crypto adoption, totaling $1.6 billion.
However, Kenya has taken a different path, with crypto adoption in the country declining by over 50 percent to $8.4 billion during the same period.
The increased crypto activity in Nigeria coincides with significant economic instability, especially a sharp devaluation of the naira that occurred in June and July 2023.
This financial uncertainty has prompted many Nigerians to turn to cryptocurrencies such as Bitcoin and stablecoins. These digital assets, particularly stablecoins, offer a sense of financial predictability in contrast to the inherent volatility of the crypto market.
The recent economic instability in Nigeria can be partly attributed to bold policy reforms initiated by President Bola Ahmed Tinubu.
These reforms involve the removal of widely-used fuel subsidies and the lifting of various exchange rate restrictions.
“People continue to seek opportunities to protect themselves from naira devaluation and the ongoing economic downturn since COVID,” stated Moyo Sodipo, one of the founders of Nigerian-based digital currency exchange Busha.
Nigerian government’s relationship with crypto has been marked by uncertainty.
In 2021, the government imposed a ban on banks and financial institutions processing or facilitating crypto transactions, citing concerns related to money laundering, terrorism financing, cybercrime, and crypto volatility.
However, there has been a significant shift in the government’s stance, with the Securities and Exchange Commission (SEC) of Nigeria introducing a series of regulations for digital assets the following year.
The “New Regulation on the Issuance, Offering, and Storage of Digital Assets,” as outlined in the 54-page regulatory framework on the official SEC website, classifies these assets as securities under the jurisdiction of the SEC.
This regulatory framework marks a significant departure from the previous ban and demonstrates a willingness to engage with and regulate the burgeoning crypto market.
