Dorsey, a Bitcoin enthusiast , has concluded that African nations have the optimum conditions needed for crypto to flourish: weak local currencies, which make it harder to get the dollars needed for global trade; complex and costly money transfers, and—perhaps most importantly—an enthusiastic, youthful, tech-savvy and increasingly desperate population.
Nowhere in Africa is this more true than in Nigeria, which leads Africa in trading volumes on person-to-person (P2P) crypto exchanges Paxful and LocalBitcoins . The western African nation ( average age 18 ) is a tech hub ; consistently tops the charts for Bitcoin searches on Google, and according to one survey , has the highest percentage of crypto users in the world. But most compelling is evidence that Bitcoin inventor Satoshi Nakamoto’s original use case, for Bitcoin as a payment tool, is positively thriving in Nigeria.
Bitcoin as a necessity
In Nigeria, Bitcoin is “a necessity as opposed to a luxury or this cool thing that you could use,” Akin Sawyerr, a US-based crypto investor and ecosystem builder, who heads up operations at risk protocol Barnbridge , told Decrypt . “For a lot of people, it's basically a lifeline to keep their businesses going.”
Access to international suppliers is vital for many Nigerian businesses. Image: Shutterstock
Sawyerr, who was born in Nigeria, explained that sub-Saharan Africa is the most expensive place to move money into. Now, the tumbling price of the country’s oil—a direct result of the coronavirus pandemic —has wrought economic strife, and led to two devaluations of the Nigerian Naira. In November 2020, the nation officially went into recession for the second time in five years.
“Nigeria’s weakening Naira currency, as well as the shortage of US dollars, are forcing businesses to switch to Bitcoin as the means of settling payments for international transactions,” Amos Samson, Nigeria manager at remittance service Sirocco Pay, confirmed to Decrypt .
Nigerian businesses need dollars to buy new supplies, and order essential equipment from abroad—but formal sources for obtaining foreign currency, such as banks, are failing to meet this demand, he further explained.
The situation is so dire that, according to Nigeria’s leading financial publication BusinessDay , some of the country’s Bureaux De Change (BDCs)—popular destinations for foreign currency exchange—have attempted to educate their customers about the use of Bitcoin, because they’ve been unable to meet the high demand for dollars. Their efforts are now reportedly bearing fruit, with plenty of businesses switching to Bitcoin for international trade.
N2.7b traded on Binance only. NGN/USD also settling at 480. Mad to think that our central bank has inadvertently driven BTC mainstream. Just here for the violence. pic.twitter.com/UELbwu2Vxm
— Akin Oyebode (@AO1379) November 16, 2020
Meanwhile, crypto services—exchanges such as Binance, and P2P marketplaces such as Paxful—have been stepping in to fill the void. In the second quarter of 2020, Nigeria’s P2P Bitcoin trading weekly volumes doubled from $8 million to $16 million, according to Arcade Research . And in the first nine months of 2020, new registrations at Paxful more than doubled compared to the same period last year.
“With devaluation and recession causing Naira depreciation, individuals and even businesses are looking to hedge the value of their funds using a good investment tool,” Nena Nwachukwu, Nigeria regional manager at Paxful, told Decrypt .
She added that Bitcoin’s current surge, which saw it reach $19,000 this week, had certainly attracted people’s attention. “I now receive many questions about Bitcoin from family members and friends who previously had zero interest in cryptocurrency,” she said.
The evolution of Bitcoin adoption in Nigeria
Paxful now has 600,000 Nigerian users, and according to Nwachukwu, the way people are using Bitcoin has grown too. Common use cases are cross border transfers, inbound remittances from Nigeria’s diaspora (who sent an impressive $23.6 billion home in 2018) and payment for school fees, suppliers and freelancers, she said. But now Bitcoin is also used as a second source of income, a hedging tool, and has even funded a human rights protest, after banks suspended organizers’ accounts.
Percentage of survey respondents who own or use crypto. Image: Statista
Reports also suggest that increasing numbers of traders are using Bitcoin to pay suppliers. Chinese suppliers, in particular, are keen to do business in Bitcoin for its speed and convenience. It also means Nigerian businesses no longer need to buy dollars using Naira or shell out fees to money-transfer firms.
Nwachukwu points out that interest in cryptocurrency has grown fastest among millennials. Nigeria’s young, entrepreneurially-minded population has contributed to its success as Africa’s leading startup investment destination in 2018.
But the majority of young people are either unemployed or underemployed, and often unbanked. Even those fortunate enough to qualify for a bank account are hobbled by spending limits that can be unreasonably low, or find that their Nigerian IP addresses have been blacklisted, said Sawyerr. Bitcoin and stablecoins , which are pegged to the dollar and easy to cash out, have proved their salvation, he added.
Last summer, Nigerians downloaded more bitcoin.com wallets than any other nation, and MetaMask Mobile, a wallet for Ethereum-based products, is proving popular too. Nigeria is MetaMask ’s third biggest market, after the US and India, Jacob Cantele, who heads up operations at MetaMask, told Decrypt .
How Bitcoin gained legitimacy in Nigeria
Many Nigerians have shunned doing business online in recent years due to the preponderance of social-financial, get-rich-quick and Ponzi schemes, such as MMM, Twinkas and others, according to Luke Anthony, overseas manager for Chinese financial services startup GetBit. The scams have tainted the image of cryptocurrencies in the country, he argued—but recent events have given Bitcoin a shot of credibility.
Last October, reports of police brutality ignited mass protests, after Nigeria’s much-hated special anti-robbery squad (SARS) allegedly killed a young boy .
The police unit stands accused of extortion, torture and murder. Many of those targeted are young males who work in the tech industry. Yele Bademosi, CEO of Binance-backed payments app Bundle , recently shared his own chilling encounter with SARS.
On October 2019, I got kidnapped by SARS, I was less than 2 mins from my home, they refused to listen to anything I said and took me from Lekki, to Ajah then all the way to Ikoyi, whilst stopping and harassing other young adults, I’m not sure how many cars they stopped and robbed https://t.co/HFq6WyFXlW
— Yele ‘夜雷’ Bademosi