 |
| Nigeria is the world leader in Bitcoin transactions |
Nigeria continues to trade cryptocurrencies more than anywhere else in the world, reflecting a loss of confidence in more traditional forms of investment.
The success has prompted millions of Nigerians to use digital currencies like Bitcoin.
A survey conducted by data platform Statista in 2020 found that 32% of Nigerians use cryptocurrency, the highest of any country in the world.
Nigeria is estimated to be the third-largest transaction volume among the top 10 countries in 2020 after the United States and Russia, with more than $ 400 million in transactions.
Although Nigeria emerged from its second recession in less than five years, it remains plagued by a challenging economic environment that makes other sources of income and currencies attractive.
The Central Bank of Nigeria devalued the official currency by 24% last year, and there are concerns that the official currency will depreciate another 10% this year.
At the same time, prices continued to rise and food prices reached their highest level since July 2008.
When Michael Ojo, founder of Lagos Media Corporation, sold the land he owned in 2018, he realized he needed to explore new investment opportunities.
Although the profits increased in local currency, the price decreased due to the devaluation of the currency against the value of the US dollar.
Ojo said, "I won in the local currency but lost in the US dollar. Then I realized that we are going back and looking for bitcoin."
The decision to invest in cryptocurrencies paid off because the return is 50 times the investment in certain currencies and Bitcoin has increased 10 times over the past year.
A former banker sees cryptocurrency as a further development of finance. Despite the volatility of the currencies, Ojo believes that the cryptocurrency is a valuable tool to hedge or reduce life risks in a high-risk environment he states.
When his wife transferred money between Nigerian and UK accounts at high commissions, his wife began to invest.
"It's not about making money, it's about how to get a better banking experience and how to save money in currencies that can preserve the value of the currency," she said.
Despite their appeal, economists around the world are warning that Bitcoin and other cryptocurrencies are high-risk investments.
And people worry that Bitcoin appreciation is a speculative bet that will someday hurt many people.
An international banker based in Nigeria said it is a financial product with potentially significant regulatory risks, and governments and central banks have yet to decide whether it can or should be regulated.
He said, "Technically, I'm not sure if the security you're using is totally foolproof and I think there are still technical uncertainties."
In order to regulate the market, the Central Bank of Nigeria banned banks from permitting cryptocurrency-related transactions in 2017. However, the ban was largely not enforced.
The Central Bank of Nigeria released a statement on February 7 explaining the need to protect people and the country from potential threats of illegal activity by unknown and unregulated agencies.
Many investors report that they continue to use their offshore bank accounts for transactions and have easy access to peer-to-peer transactions.
This means that when buying and selling financial assets, instead of transferring money directly between financial institutions and online cryptocurrency trading platforms, investors should transfer funds directly between themselves or through brokers.
The cryptocurrency community in Nigeria used this method before developing the country's virtual currency market ecosystem.
Nigerians see cryptocurrency as an opportunity to bypass foreign currency restrictions as there are many restrictions on what foreign currencies can and cannot do and they find it easier to use the cryptocurrency as an investment tool.