Cryptocurrency adoption is on the rise in Nigeria, driven by the challenges of a weakening currency and escalating inflation in Africa’s largest economy.
A recent report by blockchain research firm Chainalysis showed that from July 2022 to June 2023, Nigeria witnessed a 9% year-over-year growth in cryptocurrency transactions, amounting to $56.7 billion.
On the other hand, Uganda, though not as prominent in cryptocurrency use as some other markets, experienced impressive growth. Cryptocurrency transactions in Uganda surged by 245%, totalling $1.6 billion during the same period.
Meanwhile, Kenya experienced a significant decline, with cryptocurrency usage plummeting by over 50% to $8.4 billion.
According to the blockchain research firm, Nigerians’ interest in Bitcoin and stablecoins increased when the naira’s value plunged, particularly during the most extreme drops in June and July 2023.
The currency weakened to record lows after President Bola Tinubu embarked on a chain of bold reforms, including scrapping the long-standing costly petrol subsidy and removing some exchange rate restrictions.
Last month, Nigeria’s inflation increased for the 8th consecutive month, hitting an 18-year high of 25.8%.
In a statement accompanying the report, Moyo Sodipo, co-founder of the Nigeria-based cryptocurrency exchange Busha, explained, “People are constantly looking for opportunities to hedge against the devaluation of the naira and the persistent economic decline since COVID.”
In 2021, Nigeria prohibited banks and financial institutions from engaging in or facilitating cryptocurrency transactions. However, the country’s young, tech-savvy population turned to alternatives such as peer-to-peer trading provided by cryptocurrency exchanges as a means to bypass the restrictions imposed by the financial sector ban.
A recent survey revealed Nigeria as the most crypto-savvy country in the world. Last year, the country’s financial regulator published a set of regulations for digital assets, signalling Africa’s most populous nation was trying to find a middle ground between an outright ban on crypto assets and their unregulated use.
Nigeria’s young, tech-savvy population has eagerly adopted cryptocurrencies, for example, using peer-to-peer trading offered by crypto exchanges to avoid the financial sector ban.