Despite official disapproval from financial authorities, Nigerians are increasingly turning to cryptocurrency use.
Although many have been sold on the speculative hype of cryptocurrencies, Nigerians have found them to be of rather more practical use. For example, Nigerians use cryptocurrencies for business transactions, and to protect their savings as their local currency loses value. Because it is often hard to obtain US dollars, cryptocurrencies have also proven to be a convenient way for Nigerians to send payments abroad.
“The naira is digressing and we are trying to keep the value of the art,” said Sly Megida, an artist who uses crypto to sell his works. Megida added, he has buyers around the world that readily accept digital currencies, which have also protected his finances.
Central Bank ban
However, in February, Nigeria’s Central Bank barred local banks from working with cryptocurrencies. The monetary authority threatened “severe regulatory sanctions” and freezing accounts of firms it accuses of using them. In August, it froze the accounts of crypto users for allegedly trading with illegal foreign exchange dealers.
Incidentally, by March the dollar volume of cryptocurrencies sent from Nigeria actually rose to $132 million. In the first month following the central bank ban, the figure had risen by 17%, according to research firm Chainalysis. From there, transactions continued to rise, growing 25% year-on-year in June.
Peer-to-peer transactions
Along with barring banks from doing business with crypto, the central bank’s ban has also blocked Nigerians from traditional crypto exchanges. In spite of this, the transition of many to peer-to-peer systems has done nothing to slow crypto’s growth.
One such platform, Paxful, experienced a 57% rise in trading volume in Nigeria up to June, while user numbers swelled by 83%. Since adopting the peer-to-peer model in Nigeria in February, Yellowcard’s use “continued to absolutely skyrocket,” the exchange said.
Others are more resourceful still, trading crypto for Nigerian naira or other currencies with people found through WhatsApp or Telegram. As a result of the unregistered transactions, Chainalysis believes Nigeria’s crypto use could likely be even higher than suggested.
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