Why are cryptocurrencies increasingly adopted in Nigeria?
As Twitter’s founder, Jack Dorsey, used to say – “Africa will define the future (especially the bitcoin one!)”, as cryptocurrencies have the potential to revolutionize the continent’s sluggish and expensive payment methods, as well as the lack of basic monetary services, among other things.
For many analysts, African countries are definitely becoming a big market for cryptocurrencies and blockchain technology, and Bitcoin trading is becoming increasingly popular as a store of value, especially in Nigeria.
According to one of the latest reports of the crypto-exchange KuCoin, 35% of those aged 18 to 60 in the most populated country in Africa have traded or owned tokens within the last 6 months, and 70% of investors said they will expand their exposure to the crypto-market by the end of the year.
So, why are Nigerians so inclined to adopt, use, and trade cryptocurrencies?
One of the main reasons behind this crypto-adoption is the lack of financial and monetary services in the country, as well as fiat-based opportunities. Nigeria is a largely cash-dominated country, mostly because of a lack of financial infrastructure and limited financial literacy. It is said that over 60 million Nigerians are financially excluded, and almost 80% of them live in remote rural areas.
This limited access to financial services has been one of the main reasons why Nigeria is one of the most promising lands for crypto and blockchain-related innovations, as they can become a great option for greater financial inclusion and autonomy in the country.
Cryptocurrencies like Bitcoin can be used as a means of exchange and a method to transfer and convert money, which means that it is easier, quicker, and cheaper to move it around the globe, which is one of the reasons why digital tokens solve real issues with remittance, payments, and e-commerce cases for instance.
Corruption and a lack of transparency are also issues that the country needs to solve, pushing an increasing number of young and tech-savvy Nigerians to adopt blockchain technology. As a shared and immutable ledger, a blockchain transparently records all transactions that happen on its network, which means that there is no way to change or tamper with a transaction.
Another reason why so many Nigerians are adopting cryptocurrencies is because of very high (and rising) inflation in the country. According to Nigerian central bank data, inflation rates reached 16.56% (All Items – 12 Months Avg. Change) in March 2022, well above the 9% target of the Central Bank of Nigeria (CBN), and inflationary pressures are likely to continue rising.
As unexpected as it may seem for such a volatile asset class, cryptocurrencies like BTC are regarded as safe havens in countries like Nigeria where inflation is high. Currency shortages, monetary control, as well as political and economic instability are other reasons to use cryptocurrencies to take advantage of a decentralized asset that they consider as an alternative store of value.
There are, of course, other reasons why the adoption of cryptocurrencies and blockchain technology is growing very fast in the country, but one thing’s for sure – the unique politico-socio-economic landscape and challenges of the country are setting Nigeria up as one of the most promising lands for digital assets and technologies.