Cryptocurrency adoption in Nigeria is on the rise, driven by a weakening national currency and skyrocketing inflation, according to a report published by the New York-based blockchain research firm Chainalysis on Tuesday.
The report reveals that Nigeria, Africa’s largest economy, experienced a significant uptick in cryptocurrency transactions, with a year-over-year growth of 9% to reach a staggering $56.7 billion between July 2022 and June 2023. While Nigeria leads the crypto adoption trend in Africa, Uganda is catching up rapidly, witnessing a remarkable 245% increase in crypto usage, amounting to $1.6 billion during the same period. In contrast, Kenya experienced a decline in crypto usage, falling by more than half to $8.4 billion, as indicated in the report.
Chainalysis suggests that the growing interest in cryptocurrencies, particularly Bitcoin and stablecoins, can be attributed to the depreciation of the Nigerian naira, particularly during extreme drops in value in June and July 2023. The Nigerian government, under President Bola Tinubu’s leadership, implemented bold economic reforms, including the removal of a costly petrol subsidy and some exchange rate restrictions, which contributed to the naira’s record-low performance.
“People are constantly looking for opportunities to hedge against the devaluation of the naira and the persistent economic decline since COVID,” noted Moyo Sodipo, co-founder of the Nigeria-based cryptocurrency exchange, Busha, in a statement shared with the report.
Nigeria had previously imposed a ban on its banks and financial institutions from dealing in or facilitating cryptocurrency transactions back in 2021. However, in a notable shift, the country’s financial regulator introduced a set of regulations for digital assets last year. This signaled Nigeria’s attempt to strike a balance between an outright ban on crypto assets and unregulated use, recognizing the growing interest and demand among its tech-savvy population.
Nigeria’s young and tech-savvy demographic has embraced cryptocurrencies eagerly. Many have turned to peer-to-peer trading platforms offered by cryptocurrency exchanges to circumvent the restrictions placed on the traditional financial sector.
As cryptocurrency adoption continues to grow in Nigeria and across Africa, it poses new opportunities and challenges for the region, highlighting the need for governments and regulators to carefully consider their approach to digital assets in the evolving financial landscape.