A firsthand POV of Stablecoin adoption and challenges in Nigeria
I am a Nigerian, and Nigeria is my beloved homeland.
Nigeria is a country of diversity and boundless potential, a land brimming with hope and possibility. With a population surpassing 200 million people, it stands as Africa’s most populous nation and the seventh most populous country globally. Moreover, Nigeria boasts one of the continent’s largest economies, with a formidable GDP exceeding $400 billion.
Within Nigeria’s borders reside more than 250 ethnic groups, each preserving its distinct language, culture, and heritage. This remarkable multiplicity serves as a wellspring of strength, infusing our nation with a vibrant and kaleidoscopic cultural fabric.
I hail from a humble background, far removed from privilege and opulence.
My family embodies the essence of resilience and resourcefulness that is characteristic of many Nigerian households. While we were never deprived of our daily sustenance, we teetered on the precipice of uncertainty, aware that a single misstep could disrupt the providence of our daily meals. Like countless Nigerian families, we lived with the perpetual shadow of the unknown, most importantly, the fear that a severe illness on any one of us — which is not uncommon in these areas — could push us to bankruptcy.
I witnessed firsthand, the relentless struggles by my parents to shield us from these problems. These experiences instilled in me an unwavering conviction that I must work as hard and as diligently as they did, and perhaps even more so.
In 2018, armed with this mindset, I completed my secondary education.
Now, there is something very peculiar about the tribe I hail from. I am Igbo and my culture places a strong emphasis on hard work, personal responsibility, and the transition to adulthood marked by taking on responsibilities.
In Igbo society, there is a belief that one must always be the architect of their destiny. At a young age, you must realize the importance of individual effort and self-reliance.
Ingrained with this philosophy, I saw hard work as a fundamental value that leads to dignity and success. Thus, as a responsible young individual, I swiftly sought opportunities to sustain myself financially.
Looking back, I didn’t just do it for myself. I guess, the aim was to alleviate the burden on my parents. Also, it was not merely about putting food on the table, but rather an aversion to constantly relying on them for the means to meet my personal needs. Even at that young age, I found the act of accepting weekly allowances increasingly detestable.
It was this deep-rooted disdain that propelled me towards the world of cryptocurrency.
My Introduction to Cryptocurrency: What Drew Me in
Everyone has a unique story behind how they fell down the rabbit hole into the industry. For me, I wasn’t driven by a deep passion for technology; it was simply a desperate need for survival and the hope of attaining financial freedom in the long run.
My entry was quite amusing.
But before I delve into that, let me give you some context about the mechanics of the Nigerian WhatsApp community.
To the average Nigerian, Whatsapp is a virtual business hub. People buy legit WhatsApp contacts and add them to groups, promising to teach various skills or promote their businesses.
It was through one of these instances that I found myself entering the world of crypto…
One day, I woke up to discover that I had been added to a WhatsApp group promising to teach free financial freedom through crypto trading. Initially, I dismissed it as a scam, as I often do. On second thought, I decided to stick around a bit longer than I typically would.
After all, it was free, so what harm could it do?
Fate had a different plan in store for me. It wasn’t a scam; the tutor was serious about imparting knowledge. The class had two stages: the first segment was free, while the second required payment. As they say, there’s no such thing as a free lunch, even in Freetown.
During the first stage, we delved into the foundational aspects of the crypto industry, which genuinely piqued my interest. It became a potential escape from the realities of my circumstances — a path to a true financial breakthrough.
At that point, my focus wasn’t on technology; I was solely determined to achieve the promised success.
However, I was a broke student who was about to enter the university, with no one to fund my journey, not even my parents. So, as a resourceful Nigerian, I did what we do best — I hustled hard.
With my hustling spirit, I stumbled upon Binance’s AMA sessions, which introduced me to the technical aspects of crypto.
Back then, Binance conducted weekly AMA sessions with upcoming projects, and they rewarded individuals who asked relevant questions after the sessions. While most people saw it as a routine event, to me, it felt like my one opportunity to fund my crypto journey, and I took it extremely seriously.
This singular event was the birth of my passion for crypto writing and research. I had to familiarize myself with each project featured in the AMA sessions to ask the most pertinent questions.
Over time, I started winning a few of those AMA sessions. Soon enough, my net worth was close to $1000 (~360k naira). At this point, my parents, especially my mom, began to take my newfound interest seriously. She would occasionally excuse me from accompanying her to the market or allow me to come home late, provided I was engrossed in my research.
However, as time went on, I noticed a shift in the pace of my financial growth…
By mid-2019, my net worth wasn’t increasing as rapidly as before. The exponential growth I had become accustomed to was stalling. It took me a while to understand that although I was earning a bit more money, the value of it, in relation to what I could purchase with the Naira wasn’t rising proportionately. My purchasing power was reduced drastically.
Something needed to be done…
The Flight to Stablecoins
You see, every time I made money during the AMA sessions, I converted it to Naira. And whenever I needed dollars for crypto transactions, I converted my naira back to stablecoins.
Stablecoins are a type of cryptocurrency whose value is “pegged” to another asset, most often the U.S. dollar, to maintain price stability. They are designed to offer the flexibility of digital assets with the price stability of fiat currency.
The value of stablecoins is fixed, usually on a 1:1 basis with the U.S. dollar, meaning that a single unit of a stablecoin is worth exactly one dollar at all times. Stablecoins maintain this peg through reserves of dollars, other cryptos or a mix of both kept in U.S.-controlled bank accounts. In Nigeria, some of the most popular stablecoins include Tether (USDT), USD Coin (USDC), and Binance Dollar (BUSD).
Now, as the exchange rate was constantly increasing, it was eroding the value of my net worth regardless of the profits I made. That was the moment I realized things were about to take a turn for the worse for the Naira.
It was a harsh introduction to inflation and depreciation, as well as how the foreign exchange markets operated.
I knew something had to change. I feared falling back into a state of utter destitution. Such was my anxiety that I converted my entire net worth to dollars. I didn’t want to experience the painful realization that every time I converted my Naira to dollars, it became less valuable.
If I were suffering this, many Nigerians were also feeling the same. I wasn’t alone…
How Nigerians Perceive Stablecoins
Nigeria is a country of contrasts. It embodies both beauty and ugliness, wealth and poverty, hope and despair. Nevertheless, the resilience of its people remains unwavering as they try to forge a better future for themselves and their children.
Politically, Nigeria has a history of instability and corruption, yet it stands as a democracy.
In the realm of contrasts that is Nigeria, Godwin Emefiele emerged as the Governor of the Central Bank of Nigeria (CBN) on June 4th, 2014.
Corruption has persistently plagued Nigeria, tarnishing its reputation and hindering progress on multiple fronts. It has permeated all levels of society, including politics, resulting in severe adverse effects. Emefiele’s tenure as Governor was affected by this corruption, impacting fiscal policies and stifling Nigeria’s growth.
The appointment of Godwin Emefiele as Governor of the Central Bank of Nigeria (CBN) marked a significant moment in the country’s economic landscape. Appointed by former President Goodluck Jonathan in 2014, Emefiele assumed the role during a critical period of economic challenges and uncertainty.
These challenges included:
1. The global economy experienced a slowdown in 2014 due to the European debt crisis and China’s economic deceleration. This downturn negatively impacted Nigeria’s economy, resulting in reduced demand for Nigerian exports.
2. Nigeria’s main export, oil, witnessed a significant price decline in 2014. This decline led to a sharp reduction in Nigeria’s government revenue, making it difficult to fund the national budget.
3. Nigeria’s currency, the naira, was devalued by nearly 10% in 2014, increasing the cost of importing goods and services for Nigerians and causing inflation.
4. In 2014, Nigeria was undergoing a political transition. Goodluck Jonathan, the incumbent president since 2010, sought re-election but faced a strong challenge from Muhammadu Buhari of the All Progressives Congress (APC). This political uncertainty made it challenging for businesses to invest in Nigeria.
Emefiele’s appointment was met with scepticism as he was a controversial choice for the position. While he had a reputation as a technocrat, his lack of prior experience in central banking raised concerns. He was seen as a political appointee, closely aligned with then-President Goodluck Jonathan.
The beginning of Emefiele’s tenure was marked by numerous challenges, including the decline in oil prices, leading to a significant reduction in Nigeria’s foreign exchange reserves. In response, Emefiele introduced unconventional monetary policies such as a multiple exchange rate regime and import bans on certain goods. These policies depleted the nation’s dollar reserves, necessitating limits on international transactions. The situation was dire.
I would not label Emefiele as corrupt but rather inadequate for the significant role bestowed upon him. To his credit, he implemented some commendable policies. However, his inadequacies overshadowed his accomplishments, as his policies on foreign exchange transfers and exports unintentionally propelled Nigeria to become a leading country in crypto adoption.
On 9 June 2023, the new President, Bola Tinubu suspended him as the Central Bank Governor with immediate effect, the statement came from the office of the Secretary to the Government of the Federation by Mr Willie Bassey.
On 10 June 2023, the Department of State Services (DSS) confirmed the arrest of Emefiele at exactly 14:28 WAT through their official Twitter page. He was charged in July 2023. He was re-arrested by the DSS on 25 July 2023, at the Federal High Court in Lagos. On April 5, 2024, the Economic and Financial Crimes Commission (EFCC), filed new charges against Godwin Emefiele. Godwin Emefiele was accused of fraudulent false allocation of foreign exchange of $2 billion.
Before his removal from office, Godwin Emefiele had consistently criticized cryptocurrencies, perceiving them as a threat to Nigeria’s financial system.
In February 2021, under his directive, the CBN issued a circular instructing all financial institutions, including exchanges, to close accounts associated with cryptocurrency trading.
This decision aimed to mitigate potential risks and illicit activities associated with cryptocurrencies. The CBN has Concerns over money laundering, terrorist financing, and the lack of regulatory oversight in the crypto space. The CBN further cautioned Nigerians against investing in cryptocurrencies, highlighting their lack of legal tender status and central bank backing.
Consequently, limited access to cryptocurrencies ensued for Nigerian citizens, as banks and financial institutions complied with the CBN’s directive. Crypto exchanges faced challenges in providing services, prompting individuals to resort to peer-to-peer platforms or over-the-counter trading for crypto transactions.
The CBN’s warning was stringent. Those who refused to adjust to the new reality, had their bank accounts frozen.
I believe Emefiele’s stance on cryptocurrencies stifled innovation and impeded Nigerians’ access to this new financial tech.
Nigeria, with its young population and immense potential, is primed for economic growth. Why would a government hinder such progress?
Perhaps Emefiele sought to safeguard Nigeria’s financial system from the risks associated with cryptocurrencies. Nevertheless, these policies yielded consequences, prompting Nigerians to react swiftly.
In response to impending naira devaluation and rising inflation, Nigerians sought refuge in stablecoins.
Stablecoins are 1:1 to the US dollar and were the primary means to safeguard assets against devaluation and enable cross-border transfers, bypassing the limits imposed by the Central Bank. It also allowed SMEs a more inclusive financial ecosystem, allowing them to access capital through crowdfunding and peer-to-peer lending platforms.
The rush as on…
It got to a point where the CBN governor was compelled to address the issue on national television. The naira was rapidly losing value in the economy. Remittances were dwindling. On the black market, the naira plummeted from 360/$ to over 640/$…It is currently above 1500/$.
Many say that the rise of an informal sector within the Nigerian FX market was the primary driver. It was the common P2P exchange found everywhere in the country.
P2P in Nigeria
The average Nigerian doesn’t use WhatsApp in the way Mark Zuckerberg initially anticipated when he acquired it. In Nigeria, WhatsApp is not merely a messaging application but is also a robust platform for business and commerce. Nigerians successfully established thriving enterprises by leveraging sincerity, determination, and effective branding, all from their mobile phones on WhatsApp.
My country is home to numerous informal and formal P2P businesses. Patricia, Velox, and Jetpay are some of the largest, but there are hundreds if not thousands more.
P2P in Nigeria operates within a framework of strict trust, either through personal acquaintance or connections. Most individuals limit transactions to those they know personally. And my oh my, daily transactions are hugeee.
As Bitcoin.com reported, “According to the data from the peer-to-peer crypto exchange platform Paxful, Nigeria’s bitcoin traded volumes in the first half of 2022 nearly topped $400 million. When combined with the $760 million in trade volumes which were seen in 2021, it means the West African nation is now the crypto exchange’s biggest market globally”.
As a Nigerian, given our data collection inadequacies, I can boldly tell you that these reported figures underestimate the true extent of the market’s activity.
These P2P businesses serve as the lifeline of the entire crypto industry in Nigeria. Since banks cannot process crypto transactions, anyone seeking access to stablecoins or other cryptocurrencies must rely on these P2P shops.
In Nigeria, stablecoins reign supreme. They are preferred over volatile ones like Bitcoin or Ethereum. While Nigerians do invest in cryptocurrencies, purchasing Bitcoin, Ethereum or any other token is trading for potentially greater profits.
Nigerians also love their meme tokens. To the extent that we have dedicated P2P shops for them. It is all based on the low-unit mindset. The average Nigerian crypto user prefers to invest $50 in a meme token and have billions or even trillions of that token with the expectation to hit it big if it eventually gets to $1 per token or even $0.001 per token.
P2P shops cater to the appetite of these users and charge exorbitant rates.
Challenges
The biggest and maybe the only obstacle facing the crypto industry in Nigeria is the regulatory landscape and its implications.
How can we navigate the traditional banking system without triggering concerns?
Presently, in Nigeria, including any references to cryptocurrencies in bank transaction remarks can result in the freezing of your account. Friends of mine had their accounts frozen simply because someone mentioned “bnb”.
The government is the primary barrier to the integration of stablecoins into Nigeria’s financial infrastructure. Cryptocurrencies have already gained widespread acceptance in Nigeria, so why not legalize them fully and capitalize on conversion fees? Instead, the government decided to introduce their digital currency, called eNaira.
eNaira: A Disappointing Endeavor that Hit Close to Home
As a Nigerian deeply invested in the world of cryptocurrencies, the eNaira’s underwhelming performance struck a personal chord.
Launched in October 2021 with high hopes and anticipation, the central bank digital currency (CBDC); eNaira, was introduced to transform Nigeria’s financial landscape. However, the reality turned out to be far from the envisioned success, leaving me and many others feeling disappointed and disheartened.
Contrary to its intended purpose of reducing cash reliance, the eNaira ironically witnessed a surge in cash usage. It became apparent early on that Nigerians didn’t see a compelling reason to embrace digital currency. Cash, with its wide acceptance and familiarity, offered convenience without the need to transition to eNaira’s digital realm. Moreover, the government’s lacklustre efforts in promoting and creating awareness around the eNaira only contributed to its lukewarm reception.
But beyond the practical aspects, a deeper layer of scepticism loomed over the eNaira.
Many of us harboured concerns about potential government overreach, fearing that the CBDC could be exploited for surveillance and control, stifling our freedom of speech and political expression. As Nigeria grappled with cybersecurity challenges and inadequate infrastructure maintenance, the vulnerability of the eNaira to cyberattacks became a pressing worry, raising the spectre of financial losses and economic instability.
As someone who eagerly anticipated the launch of the eNaira, hoping it would bring positive changes to Nigeria’s financial landscape, the subsequent letdown was deeply personal. It taught me the importance of managing expectations and understanding that even well-intentioned initiatives may fall short of their goals.
Witnessing the eNaira’s failure firsthand served as a powerful reminder of the complexities involved in introducing new digital currencies. It highlighted the need for thorough research, planning, and most importantly, listening to the concerns and preferences of the people who will be affected by such innovations. I learned that technological advancements alone are not enough to drive adoption; effective communication, education, and trust-building initiatives are crucial to gaining public support.
The eNaira’s lacklustre performance also underscored the significance of understanding the societal and cultural factors that shape financial behaviours. Cash usage remained prevalent because it offered familiarity and convenience, while doubts about government surveillance and cybersecurity vulnerabilities created hesitation around embracing a digital currency. This experience deepened my understanding of the importance of addressing these concerns and tailoring initiatives to fit the unique context and needs of the population.
Looking back on eNaira’s journey, I realized that success in introducing new financial technologies requires a holistic approach that encompasses technical implementation, public engagement, and careful consideration of the social and economic dynamics at play. It taught me the valuable lesson that genuine innovation must be rooted in the realities of the people it aims to serve, and their trust and confidence must be earned through transparent communication and meaningful engagement.
eNaira served as a personal reminder that transformative change is not guaranteed, even with the best intentions. It urged me to approach future innovations with a healthy dose of realism, mindful of the complexities and challenges that lie ahead.
The eNaira’s shortcomings serve as a cautionary tale not just for Nigeria but for any country considering the introduction of a CBDC. It is essential to understand that such digital currencies cannot simply replace cash overnight or solve all financial woes. Governments must genuinely listen to and address the needs and preferences of their citizens before embarking on such ventures.
Sadly, Nigeria just had to learn this lesson through the eNaira’s disappointments.
…But guess what? We never learn from these lessons
Recent Mistakes
In January of this year, the CBN released comprehensive guidelines for governing the operations of bank accounts for VASPs. This marked a significant shift, effectively reversing the 2022 ban and allowing banks to facilitate transactions for licensed crypto businesses. The guidelines outline requirements for VASPs to ensure Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT) compliance.
Just a month later, on February 29, Bayo Onanuga, special adviser to the president on information and strategy, accused cryptocurrency trading platforms of manipulating the value of the naira in the foreign exchange market.
The federal government once again, launched a clampdown on cryptocurrency exchanges…particularly; Binance.
A day earlier, two Binance top executives — Nadeem Anjarwalla, a 37-year-old British-Kenyan and Binance’s regional manager for Africa; and Tigran Gambaryan, a 39-year-old US citizen and Binance’s head of financial crime compliance — were detained by the Nigerian authorities. Subsequently, a federal high court in Abuja ordered Binance Holdings Limited to provide the Economic and Financial Crimes Commission (EFCC) with the comprehensive data or information of all persons from Nigeria trading on its platform.
But by March 25, the Office of the National Security Adviser (ONSA) confirmed Nadeem Anjarwalla had escaped its custody.
The Securities and Exchange Commission (SEC) is currently considering proposals to potentially restrict the use of the Nigerian naira for P2P crypto transactions. This aligns with their “Operation Rescue Naira” initiative.
My Stance on the Uncertain Future of Cryptocurrencies in Nigeria
As an avid supporter of cryptocurrencies, I find myself caught in uncertainty surrounding their future in Nigeria.
The ban on cryptocurrency trading imposed by the CBN has sparked significant resistance from the public, including myself. We view cryptocurrencies as a lifeline, a means to protect our hard-earned money from the ravages of inflation and economic instability.
If the CBN were to lift the ban and form a consistent policy on cryptocurrencies, it could usher in a new era for Nigeria’s economy. I firmly believe that cryptocurrencies have the power to enhance financial inclusion, providing access to vital financial services for the countless Nigerians underserved by traditional banking systems. Moreover, it could also reduce the exorbitant costs associated with remittances. It would especially alleviate the burden on families relying on international transfers.
At this point, I think maybe, reevaluating the entire regulatory framework surrounding cryptocurrencies would be a step in the right direction. It will create a conducive environment for growth while ensuring necessary safeguards learnt from past mistakes are met.
As I witness the ban’s repercussions on our community and the broader economy, I can’t help but ponder the effectiveness of such measures and the long-term implications for Nigeria’s financial landscape.
The fate of cryptocurrencies in Nigeria is intertwined with our hopes and aspirations for a more inclusive and prosperous future. I hope the government sees it that way too.
PS: This article is my POV of crypto adoption in Nigeria. You might have a different POV of crypto adoption in Nigeria, and it is also welcome. This piece was initially written by me and published on flywheeldefi.com during my short internship stint there. I subsequently posted it on my substack after that.
Today, I have remastered it to keep it updated and to enter it for the Superteam Nigeria essay on stablecoins.
I’ll shamelessly plug myself here as a well-established crypto writer and research analyst. I have over 5 years of experience in this niche. If you have gigs and opportunities for me, you can reach out to me at alexanazodo@gmail.com
Thanks for reading, and God bless!
