For Nigerian crypto traders, the crypto landscape has changed to varying degrees depending on the level of understanding each possesses. Not much has changed for the more knowledgeable traders while the opposite holds for those whose understanding is scanty. In 2021, the Central Bank of Nigeria (CBN) passed a circular reinforcing the prohibition on banks from directly processing transactions related to cryptocurrencies. The consequence was that Nigerian traders could no longer buy crypto directly with their debit cards or via their bank apps. This made them shift to Peer-to-peer transactions for their purchases and sales.

With P2P, a great business model arose as merchants, people who buy and sell crypto to other traders, began to sell at a high price while buying at a lower price. This business is very profitable, as I have personally dabbled in this business. I have seen merchants who make a daily average profit of N250,000. An amount more than what many professionals in top industries make in a month. The lucrative nature of this business model attracts all sorts of people, and sadly, some of these people are bad eggs.

Scammers are posing as merchants, seeking greedy or unsuspecting traders to swindle. A friend of mine lost N300k to a scammer and couldn't do anything about it because the transaction involved crypto and that would bring unnecessary trouble to him. With experience extending back to 2019, I have seen red flags that indicate a scam merchant. Continue reading to learn more about these warning signs and ways to protect yourself.

The Red Flags

1. The Rate

This is the biggest red flag you'll ever see when doing P2P. If you look at the Rates highlighted in blue, you'll notice one thing about them: THEY ARE TOO HIGH!

The Nigerian Naira has experienced a very volatile 2024, ranging between N1000 and N1850 per dollar on the parallel market. The Naira has never reached 1900 per dollar so why are these merchants willing to sell at such a rate when they know they will incur losses? \

The rates you see above were taken when Naira was trading at N1600 per dollar. These merchants were willing to take a N300 loss for every dollar they sold. That is something no business person would ever do, but these people aren't business people.

If you ever see a P2P rate that is too high, run from it. Remember, whatever is too good to be true most likely is.

2. The Limit

look at the figures circled in green, they are the boundary limit values to the range a merchant is willing to do business. Any amount that does not fall within the range will not be considered for trading.

Regular merchants put limits based on reasonable limits on their trades, i.e., N50,000 - N1,000,000 or N4,000 - N30,000, etc. The scammers in the picture used limit ranges that are too wide and very unreasonable because lower limits usually get worse rates while higher limits get better rates. The rate I'd use for someone who wants to sell for $30 is not the same one I'd use to settle a trade of $1000. The larger the amount, the better the rate offered.

3. The Completion Rate

The completion rate will tell you how reliable a merchant is. When trading P2P, always go for a merchant with a completion rate of 85% and above, because these people are the reliable ones who will most times successfully carry out the trade with you.

Look at the figures highlighted in red, you'll see that none of these merchants has a completion rate above 60%. They are not reliable in completing trades and must be avoided like a plague.

Keeping Safe

Always be vigilant and take your time to gauge the accounts of merchants you want to trade with. Check to see if they have performed and passed all KYC requirements. NEVER release crypto first if you have not confirmed the payment, even if the merchant tells you that they have paid. Trust nobody but yourself and your sense.

If you are doing P2P outside a central exchange, always ensure that you personally know who you deal with. Never risk giving your money to complete strangers outside a CEX.

Till next time