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Cryptocurrency adoption is on the upswing in Nigeria, as the country grapples with a depreciating currency and surging inflation, according to a report from New York-based blockchain research firm Chainalysis, released on Tuesday.
Between July 2022 and June 2023, Nigeria witnessed a 9% year-over-year increase in cryptocurrency transactions, totaling $56.7 billion. Meanwhile, in Uganda, crypto usage, while smaller in scale, experienced rapid growth, surging by 245% to reach $1.6 billion during the same period. Conversely, in Kenya, crypto utilization declined by more than half to $8.4 billion, as outlined in the report.
Chainalysis highlighted that in Nigeria, interest in bitcoin and stablecoins, which are cryptocurrencies with values pegged to stable assets to mitigate volatility, spiked significantly as the value of the naira plummeted. This trend was especially pronounced during the severe drops observed in June and July 2023.
The naira’s depreciation coincided with President Bola Tinubu’s implementation of bold reforms in Nigeria, which included discontinuing a popular but costly petrol subsidy and easing certain exchange rate restrictions. These actions contributed to a surge in interest among Nigerians seeking opportunities to safeguard their wealth against the devaluation of the naira and the persistent economic challenges brought about by the COVID-19 pandemic.
Moyo Sodipo, co-founder of Nigeria-based cryptocurrency exchange Busha, noted, “People are constantly looking for opportunities to hedge against the devaluation of the naira and the persistent economic decline since COVID.”
It’s worth noting that Nigeria had imposed a ban on its banks and financial institutions from engaging in or facilitating cryptocurrency transactions in 2021. However, in the following year, the country’s financial regulator introduced a set of regulations for digital assets, indicating an attempt to strike a balance between a complete ban on crypto assets and their unregulated use.
Nigeria boasts a youthful, tech-savvy population that has readily embraced cryptocurrencies. For example, they have turned to peer-to-peer trading services offered by cryptocurrency exchanges to circumvent the restrictions imposed by the traditional financial sector.
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