When Nigerian office worker Chigoziri Okeke bought cryptocurrency for the first time in 2016, he was only looking to make an online payment. But the 10 percent gain on his wallet’s balance after a few days fired up the 27-year-old’s interest.
Now, the Lagos resident has more than $50,000 worth of different cryptocurrencies.
“After my initial purchase, bitcoin’s price spiked a little bit to about $400-$500 per unit,” Okeke told AFP, smiling at his shining computer screen.
“People told me it cost a dollar at some point. So, that motivated me to start investing a certain portion of my salary in cryptocurrency.”
Okeke’s experience reflects the reality of many Nigerians who are playing a key role in the global hunt for bitcoin and other cryptocurrencies in the face of the economic crisis bedeviling Africa’s most populous nation.
Nigeria’s central bank has repeatedly warned against the risks of investing in cryptocurrencies and even ordered local banks to close accounts trading in them.
But more than $400 million worth of the digital currency was traded in Nigeria in 2020, placing it third globally after the US and Russia, according to global market data tracker Statista.
“It is not a big surprise,” said Andrew Nevin, chief economist for Nigeria at PricewaterhouseCoopers LLP.
“The naira is under incredible pressure,” he said referring to Nigeria’s often unstable currency.
– Dollar scarcity –
The Central Bank of Nigeria (CBN) devalued the naira twice last year by nearly a quarter in the midst of a dollar shortage that followed a pandemic-induced crash in the prices of crude oil, the country’s major export and source of foreign exchange.
“I haven’t been able to pay my school fees for the past two weeks,” said Akudo Okoro, who recently got admission into a Canadian university, echoing the troubles many are facing over the naira.
“The banks are complaining of dollar scarcity.”
In February 2021, the International Monetary Fund said the naira was still overvalued, raising fears of devaluation.
A weaker naira could stoke inflation, already at a four-year high of 17.3 percent, and further erode purchasing power of Nigerians.
Bitcoin — the first and largest cryptocurrency — has returned more than 90 percent gains since the year began.
Cryptocurrency gained more traction last October after Nigeria blocked bank accounts of alleged financiers of popular protests against police brutality.
Supporters donated bitcoin to the group in charge of raising funds for protesters, a move backed by Twitter CEO Jack Dorsey.
– Under 30 –
Majority of the protesters were young adults under 30, a demographic accounting for more than half of the country’s 200 million people.
Yet, the age group remains largely vulnerable to economic hardships hitting the nation, including a high rate of joblessness that has created a fertile ground for crypto usage to escape poverty.
“Many Nigerians are tech-savvy, young and ready to embrace alternatives to fiat currencies, especially ones like the naira where multiple exchange rates are an encumbrance to doing business and wealth preservation,” Charlie Robertson, global chief economist at Renaissance Capital, told AFP.
More than a third of Nigeria’s nearly 70-million labour-force population are jobless, and the bulk of the unemployed people are younger than 35 like Adekunle Ahmed who started trading cryptocurrency in 2019.
The student of the University of Lagos has since employed two people in his trading business with the hopes of expanding to other sectors, including real estate.
“As an entrepreneur, you have to diversify your portfolio. I want to create more jobs after school and I already have the capital to do that,” Ahmed told AFP.
Governments across the world have introduced regulations to curb the growing demand for the digital asset recently promoted by Tesla CEO Elon Musk.
The CBN has ordered lenders to stop facilitating cryptocurrency transactions over allegations they were being used for money laundering and terrorism financing.
But supporters argued the clampdown would be ignoring the potential for job creation and easing cross-border payments in a country that has endured two economic recessions within five years.
– Regulatory crackdown –
“Solutions like cryptocurrency should have been a way to augment, not replace, the scarcity of dollars in Nigeria,” said Olusola Amusan, a Dallas-based artificial intelligence activist.
“What the country should be looking at is to create a regulatory framework to be able to provide some forms of guidance to how these cryptocurrencies are traded.”
Meanwhile, many investors and traders are still in the business even though some Nigerians complained their bank accounts were closed due to the regulatory crackdown.
The use of foreign accounts for crypto purchase and a shift to peer-to-peer-enabled platforms have replaced the services of restricted cryptocurrency exchanges.
“I can buy bitcoin as long as my accounts abroad remain funded,” said a cryptocurrency trader, who asked for anonymity.
“It’s even possible to fund my wallet in Nigeria using platforms with the peer-to-peer feature.”
Peer-to-peer allows one party to transfer cryptocurrency to another once an equivalent payment for the digital asset is confirmed by the first party.
“Cryptocurrencies are largely speculative, anonymous and untraceable,” the CBN warned in February.
But innovations such as the peer-to-peer network could keep even more Nigerians in the digital market if the economic crisis bites harder.
“Humans will always find a way around every single regulation you make,” Amusan said.
“Rather than stifle people, you better create new ways to manage the new appetite.”