Weak naira driving Nigerians to crypto, report says

Nigerians are embracing cryptocurrencies more as the naira continues to weaken, a new report says.

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The volume of crypto transactions in Nigeria grew 9% to $56.7 billion between July 2022 and June 2023, according to a report by New York-based blockchain research firm Chainalysis.

In Kenya, crypto use fell more than a half to $8.4 billion in the same period. The report said although Sub-Saharan Africa has consistently been one of the smallest cryptocurrency markets, crypto has penetrated key markets and become an important part of many residents’ day-to-day lives.

Bitcoin is more dominant in Sub-Saharan Africa than any other region in the world, it said, and Nigeria leads by far in crypto use in the region.

The report attributes the increase in crypto usage in Nigeria to the weakening naira and soaring inflation, which has led people to look for ways to hedge against the devaluation of their currency.

“People are constantly looking for opportunities to hedge against the devaluation of the naira and the persistent economic decline since COVID,” Moyo Sodipo, co-founder of Nigeria-based cryptocurrency exchange Busha, said in a statement.

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The report said Nigerians’ interest in crypto tokens such as bitcoin and stablecoins rose when the naira’s value plunged, particularly during the most extreme drops in June and July of 2023.

Naira fell on the official window from N464 to N720 a dollar in June after President Bola Tinubu’s government eased controls and allowed the currency to float more freely. The black market rate has since plunged from over 700 to 950 naira to a dollar.

Nigeria barred its banks and financial institutions from dealing in or facilitating transactions in cryptocurrencies in 2021.

Last year, the Securities and Exchange Commission published a set of regulations for digital assets.

Despite the ban on crypto transactions by Nigerian banks and financial institutions, peer-to-peer trading has allowed Nigerians to continue using cryptocurrencies.

In Kenya, on the other hand, the central bank has taken a more cautious approach to cryptocurrencies, issuing warnings about their risks and banning the use of cryptocurrencies for payments. This may have contributed to the decline in crypto usage in the country.