Crypto Interest on Rise in Nigeria
Peer to Peer Transactions Spike Despite Restrictions
Tale of Six Blind Men
BITCOIN has been a synonym for any cryptocurrency for the past decade in Nigeria. Being the first, and most popular, of all cryptocurrencies it has taken over the space as a revolutionary tool in various industries. However, how it has been perceived among Nigerians can be likened to the Indian tale of six blind men who were sent on a mission to feel the texture of the skin of an elephant.
This journey had them come back with different explanations of what the skin of the elephant they felt seemed like. While one reported it to be like a wall, the other likened it to a snake, the next said it was an extremely large cow, the fourth who touched its tusk said that it was a dangerous animal with a spear that could kill, the fifth man who felt its ear said it was like a huge fan or maybe a magic carpet that can fly over mountains and treetops, and finally, the sixth man who touched the tail of the elephant scoffed at the ridiculous exaggeration of his fellows and described the elephant as a rope and nothing more.
This tale is analogous to the various interpretations of cryptocurrency and how unknown it is to many in Africa’s largest populated country. The differing perceptions of cryptocurrency in Nigeria stems from the various pyramid and ponzi schemes which have existed before the establishment of the knowledge of cryptocurrency, and also the different programs that people have engaged using cryptocurrency.
The History of Cryptocurrency in Nigeria
For a substantial number who have been in the tech industry, cryptocurrency came as a revolution and an act of technological disobedience to traditional financial dealings and businesses. Those in the financial markets saw it as technological deviance to the conventional market that was attacked in the wave of the 2008 global economic meltdown, acting as a medium for daily transactions and a way to circumvent the traditional banking infrastructure. Many called it ‘raw gold’ seeing that it was, at that point, not generally accepted. However, the cryptocurrency did not gain much traction in the information space in Nigeria until it became a means of payment during the wave of Ponzi schemes that hit Nigeria from 2014 to 2016, when these schemes came crashing down. This crash of the various pyramid schemes also created the notion of cryptocurrency being an easy means of losing fortunes.
With the dwindling economic fortunes of Nigeria and Nigerians due the 2015 economic recession which was as a result of a slump in oil prices, the Naira (Nigeria’s legal tender) went tumbling against the United States dollar. This led to the awakening of Nigerians’ thoughts of earning in foreign currencies in order to beat the tide against the inflation of goods in the market, and to boost their disposable income. Nigeria is an import-driven economy, and cryptocurrencies became a tool for absorbing this shock. More and more people converted the Naira in their bank accounts to dollarized cryptocurrency assets to leverage against the falling Naira.
Not much happened in the cryptocurrency space in Nigeria until buzzing news went out about the rise in the price of Bitcoin; those who were monitoring it since its debut in 2008 at USD$1 saw it increase to over USD$1,000 by the end of 2013. A brief decline in March 2015 seemed to confirm the suspicion of naysayers who saw it as another way of losing money. Yet, by December 2017, the price of bitcoin rose astronomically from barely USD$1,000 to USD$20,089. This rise drew the attention of many to cryptocurrency as a viable way of hedging the dollar against the dwindling naira.
A Spike in the Use of Cryptocurrencies Among Nigerians
The 2017 spike in the price of Bitcoin led many to start investing in cryptocurrencies as it presented many advantages, one of which was a sure buffer against the constant fall in the valuation of the naira. Accordingly, many argued that with a rise in the price of many crypto assets it became necessary to move their attention from Naira-based investments to dollarized investments.
A good example of this logic can be exemplified in the growth of several crypto products against the falling Naira. For instance, in June 2020, the price of bitcoin hovered around USD$7,000 while the Nigerian Naira was selling for 320 against the dollar. Fast forward to June of the next year, bitcoin had risen astronomically to USD$60,000 — an all-time high — while the naira exchanged for over 410 to the dollar.
This calculation, when done in dollars, may look smaller as compared to the returns in naira ($NGN). For one who bought USD$100 of bitcoin at the USD$7,000 mark for 320 Naira to the dollar valuation, the investment capital was 32,000 naira. With Bitcoin hitting an all-time high of USD$60,000 such investment would have returned USD$857. Whereas this returned 857% in terms of dollar investment, the return on the naira gave a whooping 351,000 naira (1098%) return at a point when the federal government’s treasury bills paid out to investors a paltry 2% per annum. Hence, cryptocurrency became a forte of the wise.
This alone drove many into the crypto market, as they put on their traditional investment thinking hat and started searching for low-cap coins that could return as much profit as bitcoin had.
Cryptocurrency Trading
Many Nigerians got into the business of crypto trading on exchange platforms like binance.com. Most got involved in peer-to-peer lending programmes to increase their means of earning in foreign currencies as a buffer against the naira which has been on a downward spiral for a while now. Despite several warnings of cryptocurrency being a risky and speculative bet, many still engaged in it as a viable means of doing business and protecting their money from the constant devaluation of the naira against the dollar.
The Crypto Ban in Nigeria
In October 2020, during the wave of the #ENDSARS protests — a protest against Police brutality — and because of the difficulty in sending money to Nigeria, the idea to raise money through bitcoin donations sprang up. In the space of weeks, thousands of dollars in cryptocurrency was donated to the Feminist Coalition (a group in support of the protest), of which the founder of Twitter, Jack Dorsey, was a key donor.
However, in a statement by the country’s apex bank, the Central Bank of Nigeria, on the 7th of February 2021, cited the need to protect the general public and safeguard the country from potential threats posed by, “unknown and unregulated entities” that are “well-suited for conducting many illegal activities”. he trading of cryptocurrencies and its activities became restricted as people could no longer buy or sell crypto from their bank accounts; accounts found in violation of this order were frozen.
In ensuring absolute compliance, the central bank went on to freeze bank accounts owned by persons linked to cryptocurrency-related transactions. According to an article on nairametrics.com despite this order by the Central Bank, the trading of cryptocurrency spiked and continued significantly as people reverted to peer-to-peer transactions rather than direct bank purchases.
One for Freedom
Like the proverb explaining what an elephant feels like, the perception of cryptocurrency in Nigeria varies; while those in government are suspicious about it as a tool that can be used to finance terrorism — due to the country’s grapple with insecurity, and as a means of money laundering; some skeptics still see it as a product for concealing the proceeds from cybercrime, which the country is globally notorious for. The consensus among many young people who have gone about it legitimately is that it is a means that beats the conventional banking system, and can be a source of livelihood.
Beyond being a tool for trade and a source of livelihood for many, the use of cryptocurrency has been redefined. The areas of Nigerian society that need fixing — particularly the bureaucratic bottlenecks of the public sector — can leverage blockchain technology to carry out the seamless process. For example, for a country that has struggled with conducting credible elections, blockchain technology could come to the rescue in ensuring that this becomes a reality.
Summary
With strong narratives like ‘freedom’ being sold to Nigerians and ‘we are headed west’ being the core of decentralization, the future of cryptocurrency and crypto-related products — which are aimed at solving specific problems that have bedeviled the Nigerian society — is promising.
Seeing that Nigeria has a large population of unemployed persons, a majority of which are youths, the promise of cryptocurrency providing a way out of the current economic hardships drives the continuous belief in it, despite government policies and regulations.
Author Bio
Khaleb Ogbonna is a technical writer and digital investment analyst.
