The State of Blockchain and Cryptocurrency in Nigeria — Before COVID 19 Pandemic
This article contains the following:
*Relevant statistics about Nigeria.
*Information on the people.
*Rate of smartphone adoption.
*Local currency situation.
*Information on cryptocurrency usage and adoption.
Introduction — Know Nigeria
Sitting on 973,768 km² of the West African coast is the Federal Republic of Nigeria. It is the 27th-largest economy in the world in terms of nominal GDP, and the 22nd-largest in terms of purchasing power parity (PPP). It also has the largest economy in Africa. It is the most populous country in Africa, and seventh most populous in the world with 186 million inhabitants according to the 2006 census, with the population as at 2019, an estimated 201 million.
This figure is amazing, taking into account the noteworthy numbers of fatalities recorded every year from accidents, illness, insurgency etc. This is a pointer to improving healthcare and more importantly, the steadily improving birth rate. This is probably why about 90 million of Nigeria’s population is below 18, the third-largest youth population in the world behind only India and China. Nigeria has an average age of 18 years and is projected to be the third most populous nation in the world by 2050. That’s not miles away anymore. Nigeria’s age structure puts persons under 15 years in the “Children’s Age”, persons between 15 and 65 in the “Working Age”, and 65 years upwards in the “Elderly Age”. As of 2017, 43.99% of the population turned out to be children, 53.26% was in the working age, and 2.75% fell under the elderly category.
Smartphone Statistics
The smartphone statistics crunched up for Nigeria are not the worst, with roughly 25–40 million smartphone users, with a far greater number of over 100 million having access to the internet. The smartphone usage growth outlook is expected to be, at least, triple of what it is presently, within the next 5–6 years. The smartphone penetration is expected to grow accordingly to about 60% in 2025.
Poverty
For a country with such impressive statistics, it sure is unfortunate that the unemployment rate was still 23.1% as in the third quarter of 2018. Life is not El Dorado for most Nigerians, employed or not. Despite ranking 27th-largest economy in the world in terms of nominal GDP, Nigeria ranks 141st in the world with $2,033 in GDP per capita. Nigeria, the 22nd-largest economy in terms of purchasing power parity (PPP), also ranks 130th in the world with $5,967 in PPP per capita. This means, in essence, that the Nigerian economy generally is behind a hundred and forty countries, and its standard of living is lower than that of one hundred and twenty-nine other countries in the world. This shows how poor our economy is when our huge population is put into context, and how far behind the pack it is in national development. The giant of Africa is not even the giant in Africa, with Seychelles the highest ranked on the Dark Continent.
The International Poverty Line has a value of US$1.90 PPP, Lower Middle-Income Class Poverty Line US$3.20 PPP, and Upper Middle-Income Poverty Line US$5.50 PPP. The population living in poverty in Nigeria is 53.5% of the total population, as of 2009. This figure shows the estimated percentage of the population living below the International Poverty Line of US$1.90 PPP. Nigeria has overtaken India as the poverty capital of the world, with the largest extreme poverty population as of June 2018. Nigeria’s estimated number of people living in extreme poverty is 86.9 million, ahead of India in second with 71.5 million, and it is noteworthy that India has a population seven times larger than Nigeria’s.
Local currency
The situation of Nigeria’s local currency is also in a deplorable state. The exchange rate to the US Dollar had been erratic for weeks prior to the latter stages of 2019. It peaked at about 450 Naira to US$1 in mid-2019. It, however, steadied at 359 Naira/360 Naira to US$1 in the closing quarter of 2019. This is commendable if we are commending the poorest of the poor. The Naira was introduced in 1970 and was equivalent to US$1. The Central Bank of Nigeria has, over time, devalued the currency to match inflation rates and balance the economy. One of the most recent was in 2016 when the bank was forced to devalue it to about 306 Naira to a dollar from the 200 Naira it had pegged it at back in 2015. This was to adjust to the pressure put on the Naira by falling prices.
Some other policies and strategies to combat the aforementioned anomaly include barring importers of 42 product categories from accessing dollars from the CBN, reducing dollar amounts the bank sold weekly to Bureau de Change operators, making the bank the exclusive conduit for all foreign capital inflow, amongst others. These measures have made the naira’s value to the dollar, the standard currency of the world, a feather to plank. For a country that heavily relies on imports, this situation has made importation a difficult job. Prices of goods are skyrocketing, with every trader, from the car dealer to the tomato seller, backing up the hike in their prices with the mantra, “Dollar ti won” (the dollar is now expensive). To compound the woes of the naira, Nigeria’s inflation rate increased to 11.85% in November 2019 from 11.61% recorded in the preceding month. This was accelerated by the recent border closures by the Nigerian government, and the approaching festive period.
Notably, the prices of food, and in fact, virtually every other commodity have continued to rise with no end in sight. With attention being reverted to the extreme poverty rankings, it is not awe-inspiring that Nigeria tops the table by a mile. The situation is so bad that the lowest denominations of the naira have been rendered useless, while the higher denominations are losing more and more value by the day. The one thousand naira note can barely feed the average person twice a day, and close to 100 million of the population are living below 360 naira a day. The disappointment is mutual. Put these numbers in a city like Lagos where the standard of living is incomprehensibly high and has over 13 million inhabitants.
The National Assembly passed a bill in 2019 increasing the national minimum wage from 18,000 naira to 30,000 naira. The 30,000 naira is a needle in a haystack when we put into consideration the uncountable needs the average Nigerian needs to satisfy to be able to survive comfortably. It is saddening that most states have kept complaining that the new minimum wage is too high a target for them and they lack the resources to implement it. Truth be told, many Nigerians have given up on its government a long time ago, and it would not be the wisest option either to put all their eggs in that basket and expect the government to bring an end to this saga. Economy-friendly alternatives to the naira should be sought, alternatives that would help both the economy and the user. None fits this quota more than cryptocurrency.
Cryptocurrency in the Nigerian Context
It is important to note that prior to the spread of considerable awareness about cryptocurrency in Nigeria, Ponzi schemes (“an investment fraud that involves the payment of purported returns to existing investors from funds contributed by new investors”- U.S. SEC, 2018) had gained popularity among the Nigerian citizenry. Equally, a considerable amount of Ponzi schemes, mining scams, scam wallets and fraudulent exchanges were associated with Bitcoin addresses. As a result of the devastating effects of the various Ponzi schemes (notably the Mavrodi Mondial Moneybox, popularly tagged MMM) in Nigeria which suddenly collapsed towards the end of the year 2016 up to the first quarter of 2017 in leading to a massive loss of money for many Nigerians, it became imperative on the government to make a move. As such, the Nigeria government has attempted to dissuade the use of or investment in cryptocurrency.
One of the actions which were taken by the Nigerian government was the issuing of a warning about the pitfalls of cryptocurrency trade and investments. Such warnings were issued by the Central Bank of Nigeria (CBN) and the Securities and Exchange Commission (SEC). The CBN issued a statement, in January 2017, to all banks in the country, warning them against facilitating the trade of cryptocurrency in the country. The CBN also warned the general populace, stating that traders risked losing all their money by trading in an unregulated and volatile currency. Equally, the Securities Exchange Commission also released a statement in 2017 warning Bitcoin traders to exercise extreme caution. Again in March 2018, the CBN reiterated its stance on cryptocurrencies, emphasising its warning to traders that investment in or trade of digital assets are a mere gamble.
The warnings were largely designed to educate the citizenry about the difference between actual currencies; which are issued and guaranteed by the state, and cryptocurrencies; which are not. The government also added the risk resulting from the high volatility associated with cryptocurrencies and the fact that many of the organizations that facilitate such transactions are unregulated. It was also emphasised that citizens who invest in cryptocurrencies do so at their own peril and personal risk and that no legal recourse is available to them in the event of a loss. The various warnings issued also projects the opportunities that cryptocurrencies create for illegal activities, such as money laundering and terrorism, illegal drug trafficking, human trafficking, and support for radical movements.
The cryptocurrency trading in the country has however not been extinguished or suffered any setbacks despite the series of warnings. In fact, it is still legal in the country. Like a majority of African countries, Nigeria is yet to establish her stance on cryptocurrency as she is yet to introduce a legal framework or legislation for cryptocurrencies or crypto exchanges; however, there is a great interest to develop one very soon. Following the moves taken by the CBN and SEC, Nigerian legislators have urged the regulatory authorities to speed up efforts in introducing a legal framework for cryptocurrencies in the country. The CBN has since taken decisive steps by having an organized committee to review and articulate a road map for blockchain and cryptocurrency regulation as well as the possible safety when used as an asset of value and in line with global practices.
The Popularity of Cryptocurrencies.
Nigerians are quickly establishing themselves as global players in the cryptocurrency scene. Google Trends data suggest that where Bitcoin is concerned, which is by far the leading crypto on the market, the most searches for it on the planet come from Nigeria. Also, with regard to searches about cryptocurrency in general, Nigeria is a close second. This points to the increasing awareness and thirst for information about cryptocurrency amongst Nigerians. In Nigeria, it’s now becoming common for younger people to look beyond traditional employment. As many have access to the internet, there is an understandable desire to find work in the online world.
Can cryptocurrencies be successfully promoted in Nigeria?
Over time, it has been proven that cryptocurrency can be successfully promoted in Nigeria as it has been done numerously by various organizations through all forms of campaigns, events and meet-ups all over the country such as the Campus Blockchain and Cryptocurrency Awareness Tour, Blockchain and Digital Asset Summit, the EOS University project, EOS Invasion, Steemit in Nigeria, etc. Nigeria, being a developing country as well as a populous nation, is very receptive to learning about new technology like blockchain and cryptocurrency.
Can cryptocurrencies be used as a sort of payment method?
Cryptocurrency can become a payment method in Nigeria. However, this would only be the consequence of massive awareness about cryptocurrency and blockchain technology. If vendors are enlightened on the benefits of blockchain transactions, they would be ready to accept it as a means of payment. Equally, awareness about cryptocurrency among the general populace, followed by widespread adoption would create a demand for an option to pay in cryptocurrency which may force the hand of many business owners and service providers.
Also, it must be noted that various payment solutions are being innovated by companies already functioning within the country. Notably, Bitfxt has an application which allows the payment of electricity bills, purchase of mobile data and airtime etc to be done using cryptocurrency. Equally, they created the boundless pay card which allows the withdrawal of crypto. The increase in such local initiative, with help from international organisations, would, in the long run, result in mass adoption and usage. Another local crypto startup at the forefront of crypto adoption is Kurepay. KurePay is described as “a trifecta payment system solution that includes an E-wallet, payment gateway and Kure card that intends to use blockchain technology to provide solutions to e-commerce and payment solutions”.
Can cryptocurrencies solve Nigeria’s financial problem?
When looking to provide services and products outside of Nigeria or indeed Africa, it can prove difficult due to the notoriety of internet fraudsters said to operate in the region. This has seen many payment companies such as PayPal take action to block money transfers to Nigerians from abroad. However, there are companies who will facilitate transactions on behalf of Nigerians, but their fees are steep. This is where cryptocurrencies such as Bitcoin come in and tend to make a positive difference, as they allow Nigerians to receive and send payments globally. This is huge for young entrepreneurs in Nigeria who are active within the freelancing community or simply for those who wish to send and receive payments to anywhere in the world, whenever they like.
With about an excess of about 100 million internet subscriptions active within Nigeria alone, the younger generation has been prompted to use the internet and their internet-ready devices to their advantage. Resultantly, more and more Nigerians are now getting into the crypto trading trend for example, as this can provide a way to make some much-needed income. With access to crypto markets in the palms of their hands, you can see the appeal for Nigerians in the prime of their lives. It can be said that the emergence of cryptocurrencies have very much given young people in Nigeria, and the population in general, hope of better times to come where financial activities are concerned. Now, there’s the ability to send and receive funds globally, for whatever reason, while there’s also hope that cryptos such as Bitcoin will provide a viable alternative to traditional banking services within the country. The popularity of cryptos will continue to increase as more of the younger generation tend to adopt it as their preferred banking and payment solution. Therefore, it may not be long before we see it is as common as the traditional methods.
Freelancing, for example, is becoming very popular in Nigeria. However, receiving and sending payment has been a stumbling block. This is one area problem that cryptocurrencies appear to solve. Generally speaking, Nigerian graduates are now stepping into the international business world, and again, rather than use currencies such as the American dollar, they’d rather make use of cryptocurrencies. This is for similar reasons to that of freelancers, as it allows business owners to trade or source products internationally. Otherwise, by using local or foreign currencies, it could prove a difficult task to realise a business’s full potential.
Can cryptocurrencies replace local currencies in Nigeria?
It would be a far stretch to insinuate that cryptocurrency may replace local currency, as the government will be unwilling to give up fiat. However, it can engage in a competition with the local currency as cryptocurrency is an improvement on the local currency. It would act as a counterbalance against the threat of all the demerits associated with massive inflation. Countries such as Nigeria with currencies that suffer from high volatility or institutional uncertainty actually need a cryptocurrency make to act as a medium of exchange.
The key is contending with its fiat currency, Naira. Its flash devaluations add another layer of uncertainty to businesses that purchase goods or components from abroad. That’s why Nigeria presents the perfect use case for cryptocurrencies. For many businessmen, involved in export/import or businesses with foreign clients etc, the most convenient option while trading is to use cryptocurrency in making payments. However, where cryptocurrency is not accepted, one can purchase a cryptocurrency using Naira, and then exchange them for the accepted currency(e.g Yuan, Rands, US Dollars). It is much faster than using normal channels and costs a fraction of the price. If he uses a normal bank transfer, he will be charged huge fees by both the sending bank in Nigeria and the receiving bank in the other country. Also, it can take up to a week for the wire transfer to move the money.
Survey on the State of Blockchain and Cryptocurrency Adoption in your Africa
According to the cryptocurrency stablecoin survey carried out among a random population of Nigerian youths, the following was observed:
- 64% of the population believe that their country’s currency is unreliable. 20% say that they can rely on the Naira while the other 16% don’t know or don’t care.
- 66% of the population don’t like the national currency, 22% say that they like it while the other 12% don’t care.
- 62% of the population have cryptocurrency knowledge. 18% have no knowledge while the remaining 20% are unsure.
- 34% believe that a stablecoin can replace the national currency. 24% believe that this is not possible and the other 42% say that they don’t know
With respect to the possibility of stablecoins replacing the national currency (Naira), some people don’t see that happening because the government will not allow it. Some people believe that it can be included in the countries payment system but it cannot replace the Naira. Some believe that a digital version of the Naira would be more efficient. Some believe that a stable coin can replace the Naira because the government is not taking a proactive step towards cryptocurrency regulation like other countries. Some believe that adequate education about stablecoins can foster it’s adoption.
- 40% of the population think that people will accept a stable coin in the country, 16% think that people will not accept it, while the remaining 44% don’t know if people will accept it or not?
- 64% of the population believe that their country’s currency is unreliable. 20% say that they can rely on the Naira while the other 16% don’t know or don’t care.
- 66% of the population don’t like the national currency, 22% say that they like it while the remaining 12% don’t care.
- 62% of the population have cryptocurrency knowledge. 18% have no knowledge while the remaining 20% are unsure.
- 34% believe that a stablecoin can replace the national currency. 24% believe that this is not possible and the remaining 42% say that they don’t know.
- 40% of the population think that people will accept a stable coin in the country, 16% think that people will not accept it, while the other 44% don’t know if people will accept it or not?
Continued on part two: The State of Blockchain and Cryptocurrency in Nigeria — During COVID 19 Pandemic…
