In 2019, the Nigerian government completely banned foreign exchange access for textile import companies. Consequently, many business owners felt stuck and needed to act fast because the economy was suffering. The ban would make things worse, tipping them over the edge. A few tech-savvy business owners then turned to crypto as a means to pay their suppliers if they accepted major tokens like Bitcoin.
Based on insights by Paxful, a Bitcoin trading platform, Nigeria is second to the United States in terms of bitcoin trading. In dollar volumes, Nigerian users are receiving $2.4 billion worth of crypto. This is a major surge from last year’s $684 million. But this is only according to Chainalysis, a blockchain research firm. Consequently, the actual scale of crypto trades through Africa’s biggest economy could be much greater. After all, most trades can go untraced by analysts.
Various factors play a role. Rampant inflation, currency controls, and political repression have caused the glorious rise of crypto in Nigeria. In February, the government grew scared and banned crypto transactions via licensed banks. Towards the end of July, the government announced an upcoming crypto pilot program. They would introduce a government-regulated digital currency. This was in hopes that it would eliminate incentives behind the use of unregulated digital currencies.
But despite the efforts from the government to dampen trading, exchanges are reporting increased transactions. Other governments around the world can learn a lesson or two from what Nigeria has experienced. After all, Nigeria’s isn’t the only government considering regulating cryptocurrencies. For example, Rishi Sunak, Britain’s chancellor, is looking to develop their own version. Of course, it will be controlled by the Central Bank and is set to be called Britcoin.
Regulators in the EU are attempting to make digital currencies less untraceable to curb money laundering. The Chinese government is pulling the plug on mining locations in rural parts of the country. The party imposed a crackdown on crypto mining and trading in May.
In other parts of the world, Ghana, Egypt, and Turkey are trying to reduce crypto trading. They’re worried that crypto-savvy investors will start moving more crypto assets than the government is capable of regulating. That being said, Nigeria is a country with a major young population, so it’s a great hug for digital finance.
As many people try to escape poverty, trading has become a regular activity for many. A major role is played by remittances, which were worth over $17 billion, which came from Nigerians working abroad. Moreover, the way digital currencies can curb the effects of exchange rate fluctuations is also crucial. All the while, let’s not forget that the Nigerian currency Naira has fallen by 30 percent in the last few years.
