Why Is Cryptocurrency Popular In Nigeria?

You’ve presumably examined or heard about cryptocurrency, a hot topic that proceeds to make captions. To many, it may seem to be a nonentity more than stock trading, so why is it so popular?

Experts and users have said Nigerians are turning to cryptocurrency for business, to safeguard their investments as the naira depreciates, and to send payments abroad because it is often difficult to obtain US dollars.

According to research firm Chainalysis, the dollar volume of cryptocurrencies sent from Nigeria rose to $132 million in March, up 17 percent from the previous month, just after the ban from the central bank. Transactions increased by 25% in June compared to the same month last year.

What Is Cryptocurrency?

It is essential to understand the distinctions between this current format and traditional currency.

Governments control the flow of money in centralized banking and economic systems, printing more when absolutely required. 

Cryptocurrencies, on the other hand, are intrinsic money that only exists in digital forms, such as tokens.

Insignificance, cryptocurrency is a category of digital money. While it is apparent to regulate and transfer traditional currency (such as the US dollar) digitally, this is not the same as possessing cryptocurrency.

What distinguishes cryptocurrencies is that they are a blockchain-based and more democratic alternative to government-based systems.

Each type of cryptocurrency has a limited supply, which means that companies or governments cannot create more.

Why Is Cryptocurrency Popular In Nigeria?

 It is no secret that cryptocurrency is popular in Nigeria. When it comes to cryptocurrency adoption, Nigeria is one of the world’s leaders. Many people do not want to overlook the opportunity provided by cryptocurrency.

As a result, the number of people looking to buy bitcoin in Nigeria is extremely high. Despite the country’s vague legal status of digital assets, adoption is increasing daily.

Although Nigeria does not yet have a cryptocurrency law, the Central Bank of Nigeria (CBN) issued a statement earlier this year that appeared to be a ban on the use of bitcoin and other digital assets in the country. 

While many people thought this was the beginning of the end for crypto in Nigeria, the situation has taken a different turn as crypto persists to sprout and thrive in the country.

The ban has had little to no impact on cryptocurrency usage in the country because many people have adapted to the new setting, and crypto users have found other ways to buy BTC in Nigeria and continue their crypto trades.

According to a Statista survey conducted in March, 32% of Nigerians use cryptocurrency. Nigeria was also ranked 8th in Chainalysis’ 2020 report on global cryptocurrency adoption.

 The “EndSARS” revolution, which was protesting police brutality in Nigeria, used cryptocurrency to raise funds last fall, which sparked a massive increase in interest in cryptocurrency.

“Recently, the depreciation of our local currency [motivated] people to focus on saving in cryptocurrencies like bitcoin and Ethereum,” said Udeaja Kingsley, CEO of the BiTA crypto startup, adding that crypto consumers are “mostly the youths who believe in it and trade it through P2P.”

So far in 2021, the Nigerian naira has lost value, with the country’s rate of inflation standing at 18%. 

While US dollars may be hard to procure in Nigeria, bitcoin could sometimes be used as a stand-in for the dollar, allowing individuals to diversify against naira inflation.

 Because the majority of Nigerians’ purchases are imported, US dollars are in high demand and are frequently in short supply on the market.

According to Keith Mali Chung, who is the president and co-founder of Loopblock Network, an African blockchain firm, some Nigerian importers have already switched to cryptocurrency as a payment method.

 “With monetary constraints, cryptocurrency is earning all the awareness it deserves,” he said. “Over 70% of all that is consumed in Nigeria is shipped, and with financial limitations, bitcoin is gaining all the recognition it needs.”

Chung alleges that Chinese traders selling clothing and electronics in Nigeria are using cryptocurrency as an aspect of payment. 

The pattern is similar to that seen in Eastern Europe, where Chinese merchants may be sending tens of millions of dollars in cryptocurrency across the border daily.

The Use Of P2P(Peer To Peer).

The transfer or the exchange of information, statistics, or investments among parties without the engagement of a central authority is referred to as peer-to-peer. 

Peer-to-peer (P2P) interactions involve decentralized interactions between people and organizations. 

This method is being used in computers and networking (peer-to-peer file sharing), as well as virtual currency trading.

This method has helped build the popularity in crypto immediately after the ban.

Nigerians used peer-to-peer exchanges to conduct cryptocurrency transactions. So, while the ban was presumed to restrict the number of services and transactions and slow the growth of cryptocurrency, Nigerians are now trading on P2P platforms such as Remita no. 

On Trading platforms, you do not purchase BTC with Naira from the swap, but rather from another person. The P2P exchange merely acts as a consumer market to connect buyers and sellers.

So, on P2P platforms, the purchaser transmits the value of bitcoin or any altcoin he/she wishes to purchase explicitly to the vendor’s bank account, just as in a regular inter-bank transaction, as well as the vendor, transmits the crypto to the purchaser’s wallet via the exchange.

There is no need for a financial institution to accommodate the transaction. When you transfer money straight from one account to another, it is nearly impossible for banks to determine the purpose of the transaction because it could be used for anything. 

As a result, P2P trades are tricky for regulatory authorities to track, and it will be tough to locate and close such accounts.

According to figures, Nigeria will be ranked third in the top ten countries for trading volumes in 2020, after the United States and Russia, with more than $400 million in transaction data.

Although Nigeria has emerged from its second economic downturn in less than five years, the economic environment remains challenging, making new sources of income and alternative currencies appealing.