Paxful, a leading peer-to-peer bitcoin marketplace, reports that Nigeria is now has the world’s second largest Bitcoin trading volume. Nigerians have traded 60,215 Bitcoins in the last five years, or more than $566 million USD.
4 Drivers of Nigerian Bitcoin Adoption
Bitcoin trading volume was already growing at 20% per year. Then 2020 happened and created a 30% trading spike, with over 20,500 coins traded, or $451 million USD in this year alone. Obviously, COVID-19 pandemic response fulled interest in cryptocurrencies. Yet that isn’t the full reason that Paxful reported a 137% increase in new registrations in Nigeria this year.
Nigerians are well known for their ingenuity. Nigeria has the largest population on the African continent, yet it lacks sufficient formal employment opportunities for youth. The result is a country of entrepreneurs ready to adopt BTC. There are four trends that are accelerating Nigerian cryptocurrency adoption:
1. Support for EndSARS Protests
Protests for the disbandment of the special anti-robbery squad (SARS) peaked this year. The police unit stands accused of illegal killings, extortion and torture of innocent civilians: many of its victims were young men between the ages of 18 and 35.
As part of the protests, the #EndSARS hashtag went viral on social media, leading to protests in countries with large Nigerian diaspora populations. Concurrently, local activist groups started raising funds in cryptocurrencies. The Feminist Coalition raised $155,000 in Bitcoin, 40% of their $387,000 total.
2. Central Bank Naira Restrictions
The Nigerian Naira is on a multi-year drop versus the US dollar. 2020 was no different. Naira started the year around 360 to the dollar on “parallel markets” and is now close to crossing the psychologically important 500 Naira line.
However, the Central Bank insists that these black market rates are illegitimate and the real Naira value is 25% higher. The import controls and monetary restrictions it uses to support that official rate is driving businesses to seek other ways to transact with international partners.
3. Diaspora Remittance Payments
Nigerian Diaspora are also looking at cryptocurrency as the Central Bank shifts policy daily around who and what can be remitted to Nigerians. Remittances in 2020 will exceed $22 Billion USD and the Central Bank is trying to use this massive monetary inflow to prop up the Naira.
For example, the Central Bank has banned payment service providers, Mobile Money Operators, Switches, and Processors from receiving diaspora remittances. At the same time, International Money Transfer Operators must pay remittances in US Dollars.
4. SEC Regulatory Acceptance
In September, the Nigerian Securities and Exchange Commission said it would develop a regulatory framework for cryptocurrencies in the country. In November, Nigeria’s Federal Ministry of Finance announced discussions with the SEC to provide a regulatory environment for blockchain-based digital assets.
This would mean that digital assets like Bitcoin would be recognized as commodities and governed by appropriate securities law. The SEC would regulate this new asset class, not hinder adoption or innovation. Nigeria’s National Information Technology Development Agency even announced a