Financial news of the last weeks has been occupied with crypto market crash and restrictions. Investors across globe began to discuss the volatility of the crypto-market, particularly, Bitcoin. Meanwhile, more people consistently buy bitcoin in Nigeria. That shows how the services of digital currencies in some countries can be beyond superficial, magical money, just like in Nigeria.
Nigerian Crypto Market
Cryptocurrency market trading is way more prominent in Nigeria compared to the rest of the world. Indeed, last year an online survey of Statista, a data platform, concluded that 32 percent of Nigerians are familiar with the cryptocurrency market, making the highest proportion across the globe.
When it comes to the volume of trade and transactions, Nigeria was placed as third last year, following the USA and Russia. That makes $400 million worth of transactions. According to Ijeoma Ndukwe, Nigeria’s highest trading rates refer to the loss of trust in traditional forms of investment and trade.
People Increasingly Buy Bitcoin in Nigeria
An example comes from Tola Fadugbage, who moved to Lagos from his small south-western town ten years ago. Despite his rich imagination, the market conditions did not allow him to create what he dreamed.
He kept working in various jobs and barely met his expenses, which is not a typical story for Nigeria’s youth. However, he could break this vicious cycle once he discovered the digital currency market. In 2016, he came across an online advertisement of Bitcoin, leading him to read articles and watch videos for hours every day. He engaged in research and started to invest $100-200, which transformed his entire life.
In the interview of Mr. Fadugbagbe with BBC Africa, he shared details of his story. After his massive investment in the market, he evolves into a full-time trader and teacher of new investors. The holdings he owns are around $200,000 (£140,000), and he is planning to move into a house that he has been building. His story inspires a significant number of people in his conditions to buy bitcoin or any other digital currencies in Nigeria. In his words:
“No Nigerian comes to cryptocurrency and wants to look back. It’s a big opportunity.”
Buy and Sell Bitcoin Instead of Bank Transfers
Another story is from Michael Ugwu, the founder of a media company in Lagos. He sold the land he owned in 2018 and began to explore different investment strategies. The reason behind his search was the purchasing power of his earnings. He was able to earn well in naira, which could not translate in US dollar terms due to the devaluation. That rang the bell for him; it was time to look into Bitcoin.
His investments served their purpose, and he could have earned 50 times more than what he had invested in some of the currencies. For Bitcoin specifically, his money grew ten times in the last year. Mr. Ugwu, as someone with banking experience, defines cryptocurrency as an evolution of finance. In his terms:
Digital currencies are volatile and risky, but there is a possibility to hedge or reduce the risks. The wife of Mr. Ugwu, Onyeka, views digital currency from a different angle. According to Onyeka, she was tired of high charges to transfer cash between Nigerian and British accounts, and decided to buy and sell crypto instead of bank transfers. Therefore, for her, crypto is a way to save her money while keeping the value of the money.
Nigerian Economy and the Devaluation of Naira
Their reasoning is compelling when the economy of the country and the devaluation of the naira is considered. Nigeria is a big economy in Africa that survived a second recession in less than five years. However, economic conditions are challenging for millions of Nigerians, canalizing them to look for alternative currencies and sources of income.
In the same line, The national currency was devalued by 24 % last year. There are expectations that devaluation will continue by 10 % this year as well. On the other hand, living costs keep increasing, specifically food inflation, since July 2008.
In such an atmosphere, the cryptocurrency market seems like a strong alternative. Nonetheless, economists ask people to be alert on such high-risk investments. According to many economists, digital currencies like Bitcoin are too speculative bets. They might generate way more harm than people might think.
Another problem with cryptocurrencies is the regulatory risk. The central banks and governments are not clear on regulation, even though many Asian countries are launching laws on restricting or regulating the market. Nigerian Government’s Steps to Regulate the Crypto Market.
Nigerian Government’s Steps to Regulate the Crypto Market
Nigeria’s central bank also forbade banks to do transactions of cryptocurrencies in 2017, but they could not enforce the law. Also, this year on February 7, the Central bank stated that they want to protect the general public from potential threats of unregulated markets with possible ties to illegal activities. After the statement, the banks started to freeze many accounts related to crypto-currency activities.
In some cases, investors like Mr. Fadugbagbe were informed by the banks though many others were not that lucky. For instance, one source says that his bank froze his account with tens of thousands of naira, and they did not disclose the reserve. He suspects that the reason is his activities tied to cryptocurrency.
How to Trade Bitcoin in Nigeria
Despite warnings from banks or such occurrences, many investors are unwilling to abandon trading Bitcoin in Nigeria. They might even use their overseas bank accounts. It is to say that people will not transfer funds from banks or any other financial institution to a trading platform.
On the other hand, instead, they will move their funds directly to each other or through an intermediary person. That is a well-known method among the cryptocurrency community and it seems it will be a lot more common way to trade bitcoin in Nigeria.
Do Not Miss the Opportunity of the Nigerian Crypto Market
Some circles in the community consider relocating the market in Ghana, Rwanda, or Sierra Leone as they do not have any hostile moves against the cryptocurrency. On the other hand, some officials argue that a country’s response towards the market should be engagement and management of risks rather than simply shutting it down.
One of these names is the former deputy governor of the central bank, Kingsley Moghalu. As he mentions, the market provides a likelihood for many citizens of Nigeria. Another name is Gbite Oduyene, the head of EGM Group. He claims that cryptocurrency becomes a missed opportunity if the Nigerian government does not take advantage of such a high trading volume. He recommends constructing an ecosystem with rules and regulations.
Lack of Trust in System Leads Nigerians to the Crypto Market
For many Nigerians, cryptocurrencies serve to get around foreign currency restrictions concerning foreign exchange. Nena Nwachukwu, a part of Paxful, a trading platform, thinks that crypto challenges rules resulting from political reasons.
For instance, during the #EndSars protests of 2020, October, people who donated for the campaign noticed that their bank froze their accounts. At this point, digital currencies emerged as an alternative. She was one of the victims of a frozen bank account as she confronted the police.
Investors point out the distrust of centralized financial institutions and the top-down economy as the leading cause of the trend in the crypto market. They are frustrated by the government policies and the country’s economy. They trust cryptocurrency more than the shares and bonds of the government.
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