Cryptocurrencies: Nigeria is a global leader!

More cryptocurrency trading goes on in Nigeria than almost anywhere else in the world. That’s loss of faith of more traditional forms of investment.

 

Nigeria's cryptocurrency business (2020)

·                1.1m cryptocurrency trades per month in Nigeria on the Paxful platform

·                $65m traded every month

·                $100 was spent on each trade on average

·                $215 was the average spent on each trade in the US

(Source: Paxful)

Estimates show that of the top 10 countries for trading volumes, Nigeria ranked third after the US and Russia in 2020. And generated more than $400m worth of transactions.

Although Nigeria has eased out of its second recession in less than five years, the challenging economic climate remains, making alternative sources of income and alternative currencies attractive.

The Central Bank of Nigeria devalued the currency, the naira, by 24% in 2020. There are fears of a further fall in value by as much as 10% in 2021. Meanwhile prices continue to rise, with food inflation climbing to its highest point since July 2008.

 

(Source: https://ripplecoinnews.com)

 

However, this year the institution doubled down on its stance. In a statement released on 7 February it cited the need to protect the general public and safeguard the country from potential threats posed by "unknown and unregulated entities" that are "well-suited for conducting many illegal activities". Since then, many Nigerians have reported that their bank accounts have been frozen due to cryptocurrency-related activity.

The concerns of the authorities when it comes to cryptocurrencies being used for illegal purposes are legitimate but some argue that they are being too heavy handed. A former Deputy Governor of the Central Bank, Kingsley Moghalu, believes that the country should engage and manage the risks "rather than just shutting it off completely - especially to the extent that it provides livelihoods for many people in a depressed economy".

There are also fears that cryptocurrency could become a missed opportunity, according to Gbite Oduneye who heads EGM Group, a Lagos-based brokerage firm. "Nigeria is the third largest place for cryptocurrency trade in terms of volume," he explains. "If you don't take advantage, someone else will. Build an ecosystem round it. Put in rules and regulations." Nigerians also see cryptocurrencies as a way to get around foreign currency restrictions. "There are a lot of restrictions on what we can and cannot do with our foreign exchange," Nena Nwachukwu from popular trading platform Paxful explains. "Nigerians find it easier to use (cryptocurrency) as an investment tool."

At the heart of the rise of Bitcoin is a distrust of centralised financial systems and top-down economic control, investors say. Many express their frustrations with government policy and the decline of the Nigerian economy. So, crypto is the medium of exchange for many failed economies and store of value for those who have lost trust in their own currency.

 

Reference:

Cryptocurrencies: Why Nigeria is a global leader in Bitcon  trade, BBC News, 28 Feb 2021