According to various studies, Nigerian citizens are buying bitcoin in large quantities as an investment, but above all as a way to protect their money from inflation.
Bitcoin is positioning itself as an alternative to store value in countries where financial structures are not stable. The popularity of bitcoin and other cryptocurrencies has grown considerably in Nigeria and other neighboring countries because both bitcoin and stable coins solve the problems of the local population arising from the instability of the local payment unit: the Naira currency.
Nigeria's fiat currency is experiencing inflation problems and is currently severely undervalued. The collapse of this traditional currency has led many Nigerians to look for new alternatives for investing or simply storing value.
In fact, local exchange LocalBitcoins reports a 258% increase in BTC purchases in the country compared to the previous week. This huge increase in Bitcoin and stablecoin purchases in Nigeria has taken place after the Central Bank of Nigeria announced that exchanging Naira for dollars would be banned from that moment on. Godwin Emefiele, Governor of the Central Bank of Nigeria, warned that a special surveillance system would monitor illegal operations and sanction those who did not comply with these rules.
Nigerians traded $760 million in 2021
According to the exchange Paxful, Nigeria is the second country, behind the United States, where the most bitcoin is traded, although the scale of the flows is likely to Crypto in Africa is much higher. This is due to various factors such as currency controls, inflation and political repression. In fact, trading volume in 2021 in Nigeria exceeded $760 million with two million unique users. In addition, in the first few months of this year, around $400 million worth of transactions were made, so the trend is certainly positive and it is expected to exceed last year's figures.
The reality of cryptocurrencies in Nigeria is a bit complicated, though. In February, the government panicked and banned cryptocurrency transactions through licensed banks. A pilot scheme to create a new government-controlled digital currency was announced in late July, aiming to offer incentives to those who want to use unregulated crypto.
But the overall response from the government has been rather inconsistent, with the Central Bank Governor declaring that cryptocurrencies “are not legitimate money” and the Vice President rejecting the move, saying it would be far more positive to “act with knowledge and not fear, by establishing a robust, thoughtful and knowledge-based regulatory regime.” On the other hand, the Nigerian Securities and Exchange Commission has also been open to creating a more regulated environment for cryptocurrency transactions.
