Instead of Nigeria’s government coming up with cryptocurrency regulations, its apex bank on February 5, 2021, handed down an autocratic warning to the financial institutions to block all accounts that transact in virtual currencies.
Several accounts were frozen, many people lost millions of Naira, but the anti-crypto policy is yet to stamp out trading in Africa’s largest economy. Rather, buying and selling of crypto assets have continued to flourish in the country.
In this post, we take a look at 15 reasons why the cryptocurrency is booming in Nigeria despite the ban by the Central Bank of Nigeria (CBN).
In the 2021 Statista Global Consumer Survey, Nigerians were most likely to say they used or owned cryptocurrency out of 74 countries the survey covered. Nigerians in the diaspora use cryptocurrency for remittances to loved ones back home because of charges by financial institutions.
This doesn’t only apply to Nigeria, the cost of sending fiat across borders to African countries is generally high. And according to bitcoin.com, using cryptocurrency for remittances can cut costs in Africa by 90 per cent.
The growing popularity of trusted P2P platforms that support Nigeria has even made it simple for their loved ones overseas to send money to their families, friends, and loved ones at a cheaper rate.
Crypto Exchange Switch To P2P Platforms
Several crypto platforms that supported funding of crypto wallets with Debit Cards before the CBN’s announcement switched to peer-to-peer trading. Popularly called P2P, it’s a meeting point for buyers and sellers to use escrow service to securely close trades.
As such, while the government ban has prevented all financial institutions from facilitating crypto transactions, Nigerians immediately found ways around the restriction.
Since then, P2P platforms like Binance, Remitano, LocalBitcoins, Paxful and much more exchanges that switched to P2P have become popular, thereby cutting the usually charges when the debit card was in use.
With the continuous growth in P2P, cryptocurrency trading will continue to boom among the crypto community in Nigeria because buying cryptocurrencies on P2P are extremely difficult for the banks or the CBN to track crypto-related transactions.
Frustration from Nigerian Banks
Some Nigerians share their experiences with banks in Nigeria in one of the Facebook groups I belonged, none said a good thing about their bank. Another colleague told a story of how her bank almost frustrated her when she was trying to set up an SME account.
You are most likely to hear similar horrible experiences most especially when it comes to resolving issues and paper works at the conventional banks here.
Elimination of paperwork is one of the advantages that cryptocurrency brings to the table which most of the bank-frustrated young entrepreneurs are embracing in Nigeria to process and receive payment for their services globally.
Easy International Trade
In September 2021, coinbase, one of the biggest virtual currency exchanges in the world revealed that hundreds of Nigerian importers are using cryptocurrency to import goods from China (Nigeria’s major destination for imports).
“Some Nigerians are using crypto to import goods — from China, for example — that can then be resold domestically. And Nigeria isn’t alone. Throughout sub-Saharan Africa, more than $80 million in bitcoin was sent via peer-to-peer exchanges in the last month, or almost as much as was transferred in North America,” coinbase said in an analysis.
Why importers are embracing cryptocurrency in Nigeria: Nigeria’s foreign exchange market is in red, though the Godwin Emefiele-led apex bank claimed that all is well as it launched Trade Monitoring System to access forex, it’s tedious for importers to access forex, most of them patronise the parallel market where the exchange rate is more expensive.
Quicker Transactions in Cross Border Transactions
Similar to this problem is the hours of delay importers face when accessing forex, in international trade, cryptocurrency eliminates time-wasting since payment doesn’t have to land on the table of CBN governor for fetting before payment gets approval.
As such, the strict forex policy by the CBN will continue to push more importers to adopt cryptocurrency in Nigeria despite the ban. Cross-border transactions are one of the benefits of using crypto assets as a medium of payment. The CBN anti-policy only stops financial institutions from facilitating crypto-related transactions.
PayPal ID Verification Difficulty Among Bloggers
PayPal is the most preferred medium of payment by foreign clients who wish to work with Nigerian bloggers. Unfortunately, the international payment a few years ago removed Nigeria from its list of countries that can receive payment via its platform thereby reducing access of some Nigerian bloggers to foreign opportunities.
Though some of them found a way around the PayPal restrictions, their problem is compounded when PayPal requests for more details that must be verifiable with their account details.
With the willingness of some foreign content promotion agencies to make payments through bitcoin, ethereum, Binance Coin, BitcoinCash, and other cryptos, the virtual currencies will continue to flourish in Nigeria.
More Companies Accept Bitcoin:
In a research made public by Buy Bitcoin Worldwide, it’s revealed that there is a growing number of Nigerian companies that are already accepting cryptocurrency as a form of payment. For instance, Gsm2me, an online platform that sells mobile airtime and SMS packages, has bitcoin as one of its payment options.
Hedge Against Inflation in Nigeria
There has been controversy over the inflation stats released by the National Bureau of Statistics because they are not the true reflection of the market reality most especially when NBS claimed in October 2021 that inflation dropped.
Cryptocurrency will continue to thrive in Nigeria because a lot of Nigerians who are educated about crypto assets believe that inflation can not affect their assets in crypto, though they are aware of the risk in crypto trading.
Profitable Than Deposits in Banks
Poor monetary policies and the devaluation of the naira has made prices of goods and service to skyrocket in Nigeria, though government agencies continue to release stats that do not correlate with what is obtainable in the market.
Despite the volatility of the crypto assets, there are success stories of Nigerians who invested in cryptocurrencies and said they never regretted their actions.
For instance, deposits in banks attract charges like card maintenance, SMS charges and other inexplicable charges by the financial institutions.
Apart from transfer charges which are minimal, no one charges maintenance fees to keep coin in your crypto wallet.
A cryptocurrency investor and a former banker Michael Ugwu told bbc.com in a report that he made more money from selling a piece of land he bought several years ago, but realised that the money had little value when compared to the US Dollar
“I’d made naira but lost US dollars. That’s when I realised we’re hustling backwards. It was then that I started to look into Bitcoin,” saying he had made 50 times what he invested in cryptocurrency.
Loss Of Faith In Monetary Policy
Since he assumed office on May 29, 2015, the administration of President Muhammadu Buhari has taken more loans than any other government since 1999. The APC-led government inherited a total of $7.3 billion in foreign debts.
As of December 2020, the government had borrowed $21.27 billion within five years in power, bringing the number to $28.57 billion in debt.
This figure is apart from the domestic debts (which is less harmful) to the naira compared to the external debts which have forced Nigeria to channel most of its revenue to financing foreign debts thereby making the monetary policies of the apex bank have little on no effect on the economy apart from the implications of defending foreign reserves with naira because of the abnormality in Nigeria’s foreign exchange market.
Poor monetary policy will continue to be a motivating factor for the crypto community in Nigeria to continue to invest in crypto assets.
A Step Ahead of Bureau De Change
In July 27, 2021, CBN stopped the sales of forex to the over 5,000 Bureau De Change Operators in Nigeria due to sharp practices by the operators (according to Godwin Emefiele)
Accessing forex has been tasking for the BDC operators, although they claimed they have other sources of accessing forex, in contrast, cryptocurrency sellers (which can be likened to BDC operators in the fiat world) operate without government restrictions.
They trade 24/7 even as the CBN restrictions remains effective in the conventional banks, this makes bitcoin and other cryptocurrencies to thrive in Nigeria.
Almost all the crypto platforms that support P2P service (yellowcard.io, binance p2p, paxful, remitano, quidax) now have cryptocurrency academies or comprehensive and easy to understand guides on their platforms to teach newcomers in the crypto world.
With videos, guides and customer supports on these platforms who are ready to guide newcomers on how to trade, virtual currencies will continue to boom among Nigerians.
Unstoppable Virtual Currency
Banks may place limitations on the number of international transactions you can make per day, cryptocurrency has no such limitation. Also, the success of P2P after the CBN’s restrictions has shown that crypto is unstoppable. Traders have gained more confidence since the policy of the government failed to stop them.
During the #EndSars protest in 2020, organisers received financial supports through bitcoin and other cryptocurrencies. The action angered the government on how free the millions of its youths could be if the crypto assets are allowed
Means To Escape Financial Bondage
In August 2020, banks reduced the dollar spending limit on naira debit cards to $100 due to a shortage of forex. This move limited access to foreign services among Nigeria. Most of them have seen the use of cryptocurrency as a gateway to financial freedom
Free Coin By Remitano
In September 2021, a global P2P crypto exchange Remitano revealed that its registered users can mine free RENEC (remitano network coin).
RENEC is a native token developed purposely to improve the quality of services delivered to customers, reduce transaction fees and ensure secure and swift transactions on its platforms.
We’re more likely to see other platforms join RENEC innovation in the coming years even as the CBN is at a cross-road of how to regulate crypto trading to the best interest of the country.
By now, Nigeria’s government should have realised that cryptocurrency will continue to boom in Nigeria if the government remains rigid in its anti-crypto policy.
The sector should be regulated rather than being restricted.
Restricting crypto trading to promote its Central bank Digital Currency will not be an impetus for crypto enthusiasts to use eNaira.
The boom in cryptocurrencies among Nigerians is due to the freedom the virtual currencies give them.
- Featured Image by Photos by Eiseke Bolaji, Austin Distel, and Quantitatives.io on Unsplash
- Buchholz, Katharina (March 17, 2021). “How Common is Crypto?”. statista.com. Retrieved January 12, 2022
- Gogo, Jeffrey (April 23, 2019). “Crypto-Based Transfers Can Cut Remittance Costs in Africa by 90%”. bitcoin.com. Retrieved January 12, 2022
- Chinalysis (October 14, 2021). “The 2021 Global Crypto Adoption Index: Worldwide Adoption Jumps Over 880% With P2P Platforms Driving Cryptocurrency Usage in Emerging Markets”. chainalysis.com. Retrieved January 12, 2022