Nigeria remains the largest crypto economy in Africa despite the current economic situation in the country. But why are they so interested in this industry?
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Crypto Continues To Grow In Nigeria
Statistics show that even more Nigerians are now embracing the digital economy.
A report from chainanalysis has shown that Nigeria’s crypto-economy has been on steady growth since 2021. The report shows that Nigeria’s cryptocurrency usage remains the highest in Africa and it’s amongst the most developed in the world as a whole, with a year-on-year growth of 9%.
Nigeria is amongst the top 6 countries in the world where interest in cryptocurrencies has been on a steady growth since 2021.
Why Nigerians Seek Refuge in Digital Currencies
Nigerians have embraced digital currencies as a means to easily transact both locally and internationally. Nigeria’s strong inclination towards cryptocurrencies can be attributed to several critical factors.
Over the years, Nigeria has grappled with two significant recessions, exacerbated by political instability, the COVID-19 pandemic, and a sharp decline in oil prices.
Consequently, citizens of all age groups are confronting soaring unemployment rates, with over 20 million individuals seeking employment in 2021. To many Nigerians, cryptocurrency presents an opportunity for a potential escape from Nigeria’s economic crisis.
Naira, the official legal tender for Nigerians, has lost its market value. Interest in Bitcoin and stablecoins has generally risen as the Naira’s value has decreased, particularly during the most recent extremely steep drops in October.
Limited access to conventional financial options has further propelled the general shift of the population towards less orthodox means of conducting transactions. For many Nigerians, it is easier to open an account to trade cryptocurrencies than to open a bank account.
Crypto Regulations in Nigeria
In 2021, the Nigerian government introduced fresh guidelines designed to oversee digital assets. The government banned the banking system from directly transacting cryptocurrencies. In the same year, they introduced a CBDC called e-naira.
The ban on banks drew users towards peer-to-peer (P2P) platforms, which are exempt from the crypto regulations placed on banks because such platforms are non-custodial and allow customers to trade cash for cryptocurrencies among themselves.
In June, the government enacted the Nigerian Finance Act of 2023. According to this act, individuals and businesses involved in the purchase, sale, and trading of digital assets, including cryptocurrencies, will be subject to a 10% tax on their profits. These regulatory measures are pushing the cryptocurrency market towards full legalisation.
Crypto Trading Volumes In Nigeria
A recent report by blockchain data firm Chainalysis revealed that Nigerian cryptocurrency trading volume jumped to $56.7 billion between July 2022 and June 2023, from approximately $20 billion in the previous period. This was by far the highest trading volume in the Sub-Saharan African region, outpacing second-placed South Africa’s $22 billion by a significant margin.
Bitcoin is the most traded cryptocurrency in Nigeria. Outside Bitcoin, a few other altcoins like Ethereum are also very widely traded. Many Nigerians also hold stablecoins to avoid the depreciation that often comes with volatile assets.
Nigerians have also increased the use of stablecoins as a hedge against the naira whose value is consistently dropping. Nigerian exchanges have received close to $ 5 billion worth of crypto most of them being stablecoins