The depreciation of the naira against the dollar and seamless access to cross-border transactions are seen as the main factors driving millions of Nigerians into cryptocurrency.
A recent report by Triple A, a cryptocurrency analysis platform, estimated that over 22 million Nigerians, 10.3 percent of Nigeria’s total population, owned cryptocurrency as of the third quarter of 2022.
The report shows that 6.3 percent of the population owned cryptocurrency in 2021, which represents about 63 percent increase in ownership within a period of one year.
Experts who spoke to BusinessDay said crypto ownership increased in Nigeria because the blockchain serves as a currency devaluation hedge and offers easy means of foreign transactions without restrictions, which may require numerous steps to achieve using the Nigerian payment policy.
“A demographic analysis of Nigerian users will no doubt show a heavy skew towards Gen Z. There are a number of factors that could be attributed to this surge but the most obvious remains that it acts as a currency devaluation hedge, especially if converted to stablecoins,” Ibrahim Shelleng, a business development expert, said.
“It provides a seamless and convenient method of making cross-border payments without the excessive charges and bureaucracy of traditional channels. As an investment outlet, even though it is a volatile asset class, it has been lucrative to many traders but also the downturns have been hard-hitting. Despite this, it has remained an attractive asset class for younger, more risk-taking investors,” he added.
Shelleng said another factor is that crypto companies such as Binance have carried out massive marketing campaigns in Nigeria to encourage more users.
“There are a lot of Nigerians, especially tech guys, working remotely for foreign entities and are being paid in crypto at any given time without undergoing stressful payment channels,” he said.
Ebuka Anichebe, managing director of Jean-Paul and Associates Consultancy, said, “A lot of Nigerian youths who are millennials but mostly Gen Z are inadvertently drawn towards the use of cryptocurrency platforms like Binance or Trust Wallet not necessarily because of the anonymity and security that blockchain provides, but most especially as a result of the fact that it is easier to do forex transactions and transfers using the peer-to-peer trading option provided.”
He said crypto platforms now allow Nigerian users to conveniently transfer millions of dollars for payments of goods and services with almost negligible transfer fees and in mere minutes instead of days when using traditional banks.
Anichebe said most Nigerians using these platforms may not necessarily be trading in cryptocurrencies like Bitcoin or Ethereum but use the platform to carry out transactions in stablecoins and tokens like USDT and eNaira.
He added that some save money in dollars or USDT using the crypto wallets as a hedge against naira depreciation and convert them when needed.
He said: “It doesn’t help that the naira is depreciating. So investing in naira-based investments often is seen as a complete waste of time. For instance, if your stocks should do an 18 percent uptick in gains within a calendar year, that profit in reality is already eroded by the 25 percent depreciation of the naira against the dollar.
“So we invest in cryptocurrencies as a new asset class because during the bull run, stupendously fabulous profits can be made. I once did a $100 bet and got $4,800 within a week, which Nigerian company listed on our stock exchange or elsewhere can ever boast of that, even in five years.”
Raphael Idu, a financial market analyst at CT Traders, said the majority of platforms coming up today are making use of mostly crypto options for payment.
Idu said: “We used to have dollar cards, PayPal and others. If you want to deposit forex, for instance, you will need something like PayPal and Payoneer. There were difficulties using PayPal and you can’t enjoy easy transactions.
“To even get and fund a dollar card as a Nigerian is also difficult. Instead of striving to get and fund a dollar card, people now prefer buying USDT and transferring from address to address, rather than taking these long processes.”
The analyst said Nigerians are also in search of jobs that will enable them to earn in dollars to escape naira depreciation.
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Idu said: “Naira is depreciating. Some of these online jobs are paying with PayPal, USD currency-created cards, and crypto. It is easier for me to say that I want to receive my payment in crypto and save it in USDT, which is a stablecoin.
“Most people who also earn in naira want to save in dollars; so they buy crypto to save up and when the naira depreciates, it goes to their favour. If you buy 10 dollars’ worth of USDT when a dollar is N450 and you spent N4,500 buying USDT and refused to sell it then, you will now have a choice to double your money now when a dollar is equal to N750. Also, if you withdraw from PayPal, it can take like eight hours but crypto will deliver within five minutes.”
Innocent Ebiega, chief executive officer at The Milliosphere, said the high rate of unemployment in the country is another factor driving Nigerians into crypto.
Ebiega said: “The economy is barren now and a mass number of youths are jobless, and this is a major driver. You just need the knowledge and frequent interaction with the crypto space to start earning.
“If you have a dollar account now, there is an amount you can transact in a day, especially when trying to buy things online, and Nigerians don’t really have such tolerance. So crypto makes it easier to move money online and carry out limitless purchases.”
He said there is also opportunity in crypto where Nigerians buy and sell dollars for different prices, adding that dollars can also be purchased at a lower price and sold at a higher price using crypto platforms.
“The devaluation of naira is playing a major role. The way inflation is rising in the country, Nigerians find it better to store in dollars to take anytime needed and that brings them to crypto stablecoins. People are now changing their naira to crypto. They are switching to higher currency that gives them a better store of value over time. Most times, you get more than what you have put in,” he added.
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