Overview of Cryptocurrency in Nigeria

In February of 2021, Nigeria banned all cryptocurrency transactions. To mitigate this, people began trading peer-to-peer using Bitcoin and as of October 2021, Nigeria became second to the US in bitcoin trading. As of May 2021, Nigeria traded $2.4 billion worth in cryptocurrency. The interest in cryptocurrency began during “EndSARS”, a movement against police brutality which utilized Bitcoin to raise funds. Furthermore, the increasing devaluation of the Naira (Nigerian currency) due to high inflation encouraged people to start saving their money in cryptocurrency. Import-related factors also contributed to the increased use of cryptocurrency as importers demand US dollars and there is often not enough available to them. As a result, importers began switching to cryptocurrency for payment to eliminate financial restrictions. In October 2021, Nigeria launched eNaira, their own central bank digital currency.

A New Digital Currency: eNaira

The Central Bank of Nigeria partnered with Bitt Inc to launch the eNaira. They also led the development of digital currency in the Caribbean known as “DCash”. The eNaira is used just like the Naira and is intended to promote financial inclusion, reduce cross-border payments, improve the availability of Central Bank money, and enable a more efficient system of payment. The digital currency is fixed to the naira, so its value fluctuates against the US dollar. To use the currency, Nigerians can download the app and fund their eNaira wallet with their bank accounts. Through the app, they can add funds, check balances, view history, and make P2P payments. In order to make in-person payments with their eNaira wallet, users scan a QR code to send money to the desired entity. In this way, payments are mobilized and kept secure. 

Boom in P2P trading: Paxful

Paxful is a peer-to-peer bitcoin marketplace. It gained immense popularity in Nigeria after the government banned cryptocurrency bank transfers. In the first three quarters of 2020, there was a 137% increase in new Paxful registrations in Nigeria. In fact, Nigeria accounts for the largest user base of traders on Paxful with 1.5 million users; in the last five years, they traded 60,215 bitcoins. This comes at no surprise, as P2P trades are difficult for the government to trace because they do not require the use of going through a third party. P2P transfers do not raise concern as they can be accredited for several reasons.

Why does cryptocurrency matter to Nigeria?

Financial Inclusion

As far as financial inclusion, cryptocurrencies offer people easy access to capital. Over  “1.7 billion people in the world currently lack access to banking services” and the benefit of cryptocurrencies like Bitcoin do not require the user to have a bank account.  Bitcoin only requires internet access and a smartphone, two resources more common than owning a bank account. The current banking system in Nigeria requires large transactional fees and long waiting times for those who wish to convert their money to an international currency. Bitcoin, however, does not use intermediaries, hence no large transaction fees and much quicker delivery. Another important facet of financial inclusion that cryptocurrency offers is the economic opportunities it presents. Paxful’s largest user base for cryptocurrency trading is Nigerians; anyone who opens an account can trade cryptocurrency and earn additional income. Nigerians well-versed in computing can also mine Bitcoin as a source of income. 

Protection Against Depreciation in Nigeria 

Six years ago, only 6% of adults invested in cryptocurrencies. As of 3 years ago, 37% of adults invest in cryptocurrencies. As of April 2022, “70% of Nigerian cryptocurrency investors intend[ed] to increase their cryptocurrency investment over the next 6 months.” This influx in cryptocurrency investors is caused by the increased depreciation of the naira, specifically a 209% depreciation since 2016. “The depreciation of the naira has triggered the worst economic downturn since the end of the Nigerian Civil War.” Monetary assets in Nigeria are losing value year over year and cryptocurrencies offer a solution to this. Nigerians can store their wealth safely in cryptocurrency such as Bitcion without having to worry about increasing depreciation that the naira faces. 

Send Payments Abroad

Conversion rates are expensive for Nigerians, especially with increased depreciation rates the naira faces. To send payments to other countries, Nigerians can instead use cryptocurrencies. By converting their money into a cryptocurrency of choice, they can then send money and trust that it will remain stable. 

Prominent Cryptocurrency Companies in Nigeria 

Loopblock Network – African AI Blockchain firm 

The Loopblock Network was founded in 2018 with the aim to provide technology that will aid the growth of digital assets and DeFi in all of Africa. As of January of this year, they announced a training program catered specifically to Nigerians. They plan to train 100 Nigerians in the web3 and blockchain space, specifically in the realm of development. The motive behind the company’s initiative is centered around the fact that Nigerians and all of Africa essentially missed out on the opportunities within the Web 2 revolution. If they would have taken advantage of previous technological revolutions, they believe they could have housed a technology giant like Google or Microsoft. 

Blockchain Technology Association of Nigeria (SiBan)

SiBan is a decentralized association of Nigerian individuals who share the aim of growing cryptocurrency initiatives in Nigeria. They host various campaigns intended to educate Nigerians about Blockchain. Pizza, their bi-monthly newsletter, educates Nigerians on news related to cryptocurrency events and advances in Nigeria. They have also introduced a scam alert system to eliminate unethical activities on the Blockchain. SiBan seeks to work with government regulators to make public access to the Blockchain easier. There are varying levels of membership facilitated through nodes including corporate, venture capital, and technical developer nodes. 

Blockchain Nigeria User Group

Africa’s first smart contract community, the Blockchain Nigeria User Group, is a Decentralized Autonomous Organization that aims to create an inclusive and transparent financial ecosystem in Nigeria. The DAO is run on the BNUG Token which gives members general access to the platform, voting and contribution rights, and discretion on rewards to stakeholders. BNUG Token holders can also create NFTs and sell them directly on the BNUG platform or similar platforms including Opensea. The DAO also includes a LaunchPad in which token holders can vote for projects they feel have high potential and allocate funding to them. BNUGDAO Charity is another initiative which supports charities across Nigeria. 

Cryptography Development Initiative of Nigeria  

The CDIN is a non-profit organization with the mission of promoting cryptography and the digital economy in Nigeria. The NGO has contacts with various Nigerian stakeholders and together they aim to fix the lack of awareness that surrounds cryptocurrencies. Some of their objectives include creating a platform for cryptocurrency learning, encouraging national efforts regarding cryptocurrency products and services, and opening the arm for cybersecurity in Nigeria. They are also working on the NITDA National PKI Project, a governmental organization which promotes secure transmission and information exchange through electronic means.

Conclusion

Cryptocurrency was banned in Nigeria and all bank accounts using digital currencies were terminated in February 2021. Nigeria then introduced the eNaira, their own digital currency that is pegged to the naira. Before long, the naira has been facing increasing depreciation over the last few years, which caused a spike in peer-to-peer trading in cryptocurrency and users saving their money in crypto to protect their wealth. Several Nigerian companies have emerged to promote the use of cryptocurrency; they each have initiatives and efforts which, in different capacities, intend to raise awareness among law enforcement agencies of the benefits of a cryptocurrency adoption.

ABOUT THE WRITER

Brianna Perez is a contributor to Identity Review from the University of Southern California. Do you have information to share with Identity Review? Email us at press@identityreview.com. Find us on Twitter

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