Use Of Cryptocurrencies Continues To Grow In Nigeria Despite Naira Devaluation

Nigerian President, Tinubu Ball (photo: Twitter @NGRPresidentt)

JAKARTA - The use of cryptocurrencies continues to grow in Nigeria in line with the weakening of currencies and the high rate of inflation in Africa's largest economies. This report comes from New York-based blockchain research firm Chainalysis, on Tuesday, September 19.

The number of crypto transactions in Nigeria grew by 9% year-over-year to 56.7 billion US dollars (Rp870.2 trillion) between July 2022 and June 2023. In Uganda, the use of cryptocurrencies was smaller but grew rapidly, up 245% to US$1.6 billion (Rp24.5 trillion) in the same period. Meanwhile, its use in Kenya fell more than half to US$8.4 billion (Rp128.9 trillion).

According to Chainalysis, interest in bitcoin and stablecoin - crypto tokens whose value is related to stable assets to protect against high volatility - increases as Naira's value declines, especially during the most extreme declines in June and July 2023.

The currency value weakened to a record low after Nigerian President Bola Tinubu implemented some of the largest reforms ever in Nigeria in recent years. The reforms, including removing popular but expensive fuel subsidies and removing some exchange rate restrictions.

"Residents continue to look for opportunities to protect themselves from Naira's devaluation and the ongoing economic downturn since COVID," said Moyo Sodipo, co-founder of Nigeria-based Busha crypto exchange, as quoted in the report.

In 2021, Nigeria bans its banks and financial institutions from dealing with or facilitating transactions in cryptocurrencies.

Last year, the country's financial regulator issued a series of regulations for digital assets, signaling that the country with the largest population in Africa is trying to find a midpoint between an absolute ban on crypto assets and their unregulated use.

Young and tech literate Nigerians have enthusiastically adopted cryptocurrencies, for example by using peer-to-peer trading offered by crypto exchanges to avoid a ban on the financial sector.