Despite government rules limiting crypto trades within financial institutions in an effort to protect citizens and monitor the technology’s growth, many Nigerians have continued to engage in crypto despite the weakening naira as shown in the underground market.
On a bi-annual basis, Nigeria’s peer-to-peer transactions increased by 25%. Nigeria now has $219 million in P2P volumes on two major P2P platforms (Paxful and Localbitcoins), followed by Kenya with $92 million and Ghana with $69 million.
Nigeria recorded over 16,000 deals each day across the country in 2021, according to Paxful. The increasing use of digital asset trading in the country is due to a variety of factors, one of which is to protect against the sharp depreciation of the native currency.
According to Chainalysis Research, many inhabitants in emerging economies such as Nigeria use cryptocurrencies “to protect their funds against currency depreciation, send and receive remittances, and conduct business transactions.”
The Nigerian Securities and Exchange Commission recently released guidelines on the issuance and custody of digital/virtual assets such as Bitcoins and non-fungible tokens (NFTs) in the country, reportedly in response to an increase in trading activity.
Despite CBN’s recent interventions, the naira has continued to weaken, with the parallel market finishing last week at N610 per dollar thereby pushing many young Nigerians to hold Bitcoin and other crypto-assets like stablecoins, amid the ongoing bearish trend.
Citizens also use the flagship crypto for remittance services, in which they trade bitcoin or other cryptocurrencies for Naira OTC. A Nigerian Over-the-Counter (OTC) trader, for example, could offer to buy bitcoin from another Nigerian and pay in Naira. Millions of Nairas are exchanged daily for OTC trades, providing dealers with a steady source of money.
Nigeria, according to Statista, is one of the African countries with the highest population as well as the highest number of cryptocurrency adoptions.
According to Google Trends, Nigeria had the third-highest number of bitcoin searches in the world at the time of writing, indicating the cryptocurrency’s expanding utility in Africa’s largest economy.