NIGERIA, Africa’s largest economy, has witnessed a notable surge in cryptocurrency adoption as the nation grapples with a weakening domestic currency and escalating inflation, according to a recent report by Chainalysis, a New York-based blockchain research firm.
The report revealed that Nigeria experienced a 9 percent year-over-year growth in cryptocurrency transactions, reaching a total volume of $56.7bn between July 2022 and June 2023. Meanwhile, Uganda, a nation with a smaller cryptocurrency user base, demonstrated remarkable growth, with crypto usage surging by 245 percent to reach $1.6bn during the same period. In contrast, Kenya experienced a decline in cryptocurrency transactions, with volumes falling by more than half to $8.4 billion.
One of the driving factors behind the increased interest in cryptocurrencies in Nigeria has been the severe depreciation of the naira, the nation’s currency. This phenomenon became particularly pronounced during extreme declines witnessed in June and July of 2023. As a response to these economic challenges, Nigerians turned to cryptocurrencies, especially bitcoin and stablecoins.
Stablecoins, which are cryptocurrency tokens pegged to a stable asset to mitigate price volatility, gained prominence among Nigerians seeking to protect their assets from the naira’s devaluation. President Bola Tinubu’s comprehensive reform agenda, which included the removal of exchange rate restrictions and the elimination of a costly petrol subsidy, contributed to the naira’s significant depreciation.
Moyo Sodipo, the co-founder of Busha, a Nigeria-based cryptocurrency exchange, highlighted the driving forces behind this trend, stating, ‘People are constantly looking for opportunities to hedge against the devaluation of the naira and the persistent economic decline since Covid.’
It is worth noting that Nigeria had imposed a ban on its banks and financial institutions from dealing in or facilitating cryptocurrency transactions in 2021. However, the country’s financial regulator introduced a set of regulations for digital assets last year, indicating an attempt to strike a balance between banning cryptocurrencies outright and permitting their unregulated use.
Despite regulatory challenges, Nigeria’s tech-savvy younger population has embraced cryptocurrencies enthusiastically. Many have turned to peer-to-peer trading facilitated by cryptocurrency exchanges as a means to circumvent the restrictions imposed on the financial sector, further contributing to the growth of cryptocurrency usage in the country.
This surge in cryptocurrency adoption in Nigeria reflects the broader trend of digital currencies gaining popularity across the African continent as individuals seek alternative financial solutions amid economic uncertainties.
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