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In Spite of the Banking Ban, Crypto is Booming in Nigeria

29 July 2021 13:00, UTC
Denis Goncharenko

32 percent of Nigerians, according to a Statista poll in March, said they're using crypto. Similarly, Nigeria was placed ninth in Chainalysis' 2020 report on bitcoin usage throughout the world, which was released in February.

One of the main reasons which caused the crypto explosion was the EndSARS campaign. Through this campaign, people were demonstrating against the police in Nigeria. Nigerian people in the framework of the campaign started to donate money with the use of digital currencies. Adoption may also be influenced by economic considerations, according to recent research.

According to the statement of Udeaja Kingsley, who is CEO of the BiTa, says that most of the people are youngsters who believe in trading with the use of P2P. In addition to that, she stated that the tendency of depreciating national currency led people to save their money in BTCs and ETHs.

Nigeria's inflation rate of 18 percent has caused the naira to lose value thus far in 2021. Some people in Nigeria use bitcoin to hedge against the naira's inflation despite the fact that U.S. dollars are difficult to come by. Strong demand for U.S. dollars is a result of the fact that most of the items Nigerians buy are imported.

According to the co-founder of Loopblock Network, Keith Mali Chung, there are many Nigerians who have already started to embrace cryptocurrencies as a way of payment. 'Over 70 percent of anything that is eaten in Nigeria comes from imports,' he added.

Crypto is being used as a kind of trade by Chinese merchants selling apparel and electronics in Nigeria, Chung added. Eastern Europe has a similar trend, as well. As a result, Nigerian officials have taken steps to tighten down the use of bitcoin. Their attempts had clearly failed a few months later. To deal with their suffering economy, individuals in this country are turning towards cryptocurrency despite the state's prohibition. Earlier this year, the Nigerian Central Bank urged banks to "identify people and/or companies" who were performing crypto transactions or operating crypto exchanges and "guarantee that such accounts are terminated promptly." But despite this restriction, bitcoin is still available in Nigeria. So the crypto-community began trading directly with each other or exchanging money directly between each other (peer-to-peer transactions).

This may be partly due to the current bull market, according to the blockchain analysis firm Chainalysis. This compares to the $684 million that Nigeria got in December of last year, according to a report from the analytics firm.

Cryptocurrency is alive and thriving in Nigeria, despite the limitations that come with that kind of geographical data. According to Chung, he knows of merchants that make daily transactions of $2 million to $5 million, and that the figure is growing quickly.

As a result of the epidemic, several young Nigerians see bitcoin and smaller, newer cryptocurrencies as a method to generate money. In addition to that, Chung claimed that many investors already started to take advantage of the decentralized system and they actively use cryptocurrencies for several reasons and ways. As a result, "a lot of individuals are getting into different yield farming schemes," he said.

Ray Youssef, CEO of Paxful, a website that allows users to purchase and sell bitcoin on a peer-to-peer basis, feels that the most important element in cryptocurrency's appeal in Nigeria has been "the tremendous desire and entrepreneurial aptitude of the Nigerian young."

Niger's central bank, as well as the Nigerian government, hasn't been overtly opposed to crypto. Adamu Lamtek, the central bank's deputy governor, claimed the authority has never outlawed cryptocurrency activities in Nigeria.

Nigeria's reality, though, remains difficult for certain crypto companies operating on the ground.

Fiat deposits and withdrawals have been banned since February, according to a recent statement by CEO Marcus Swanepoel of Digital Currency Group's Luno. Swanepoel stated the business "intensified regulatory lobbying" to resolve the situation:

Day and night, we negotiate with Nigerian partners to get them jointly working with the government on a solution that works for everybody. People should be able to withdraw funds from the CBN and other crypto sites

Stakeholders in Blockchain Technology Association of Nigeria (SiBAN) member Chike Okonkwo stated that there were attempts to have a dialogue with the Central Bank by the crypto community, however, they haven’t heard anything back yet.

Okonkwo stated that because of the CBN's action, the Securities and Exchange Commission (SEC) had to postpone their own plans.