Nigeria is a country with a population of over 200 million people, and a GDP of about $477 billion. It is also a country with a high level of inflation, currency devaluation, poverty, unemployment, corruption, and political instability. These factors have created a fertile ground for the adoption of cryptocurrencies, which offer an alternative way of storing and transferring value, as well as accessing financial services and opportunities.

Nigeria had the highest proportion of cryptocurrency users in the world, with 32% of the respondents saying they used or owned cryptocurrencies. From July 2022 to June 2023, Nigeria witnessed a 9% year-over-year growth in cryptocurrency transactions, amounting to $56.7 billion. A study also found that even in 2023, about 35% of Nigerians aged 18 to 60 were actively trading or investing in Bitcoin and other cryptocurrencies. In 2023, Nigeria witnessed a 9% year-over-year growth in cryptocurrency transactions, reaching a total of $56.7 billion. This made Nigeria one of the-largest market for cryptocurrency trading in the world.

But what are the reasons behind this remarkable growth? And what are the implications for Nigeria’s economy and society? I will try to answer these questions, and provide my personal perspective on the current state and future prospects of Nigeria’s crypto usage.

The Drivers of Crypto Adoption in Nigeria

There are several factors that have contributed to the increasing popularity and adoption of cryptocurrencies in Nigeria. Some of the most important ones are:

The need for a hedge against inflation and currency devaluation: Nigeria has been suffering from high inflation rates, which reached to an 18-year high of 25.8% in August. The naira, Nigeria’s currency, has also been losing value against the US dollar, weakened by 23% to 1,099 naira per dollar basing on last week’s figure. This means that Nigerians have been losing their purchasing power and savings, and have been looking for ways to preserve and increase their wealth. Cryptocurrencies, especially bitcoin, have been seen as a viable option, as they are scarce, decentralized, and independent of any government or central authority.

The need for financial inclusion and empowerment: Nigeria has a large unbanked and underbanked population. According to KMPG, a third of Nigerians have low financial capability, less than 30% of adult. Nigerians have or use products or services from non-bank formal financial. This means that millions of Nigerians are excluded from the benefits of the modern financial system, such as saving, borrowing, investing, and remitting money. Cryptocurrencies, on the other hand, offer a low-cost, fast, and accessible way of participating in the global digital economy, without the need for intermediaries, identification, or regulation. Cryptocurrencies also enable Nigerians to access new sources of income and wealth creation, such as trading, mining, staking, lending, and earning interest on their crypto assets.

The need for freedom and privacy: Nigeria has a history of political and social unrest, as well as corruption and human rights violations. Many Nigerians have been dissatisfied with the government’s policies and actions, especially regarding the management of the economy, the security situation, and the response to the COVID-19 pandemic. In October 2020, Nigeria witnessed a wave of protests against police brutality, known as the #EndSARS movement, which was met with violent repression and censorship by the authorities. Cryptocurrencies have been used by Nigerians as a way of expressing their dissent, supporting the protesters, and circumventing the government’s control and surveillance. Cryptocurrencies also offer a degree of anonymity and privacy, which can protect Nigerians from identity theft, fraud, and harassment.

The Benefits of Crypto Adoption in Nigeria

The adoption of cryptocurrencies in Nigeria has brought several benefits to the country and its people. Some of the most notable ones are:

Economic growth and innovation:

Cryptocurrencies have created new opportunities for entrepreneurship, employment, and education in Nigeria. According to a report by Chainalysis, Nigeria ranked second in the world in terms of crypto adoption. This means that Nigeria has a vibrant and dynamic crypto ecosystem, with many startups, platforms, and communities that are developing and providing crypto-related products and services. Cryptocurrencies have also attracted foreign investment and talent to Nigeria, as well as boosted the country’s reputation as a leader and hub for blockchain and crypto in Africa.

Financial inclusion and empowerment: Cryptocurrencies have enabled millions of Nigerians to access and benefit from the global digital economy, without the barriers and limitations of the traditional financial system. Cryptocurrencies have also increased the financial literacy and awareness of Nigerians, as well as their financial autonomy and sovereignty. Cryptocurrencies have also fostered a culture of saving, investing, and wealth creation among Nigerians, especially the youth, who make up more than 50% of the population.

Social impact and change: Cryptocurrencies have been used by Nigerians as a tool for social good and change, as well as a means of expression and resistance. Cryptocurrencies have supported various causes and initiatives, such as the #EndSARS movement, the Feminist Coalition, the Nigerian Red Cross, and the Binance Charity Foundation. Cryptocurrencies have also enabled Nigerians to voice their opinions and demands, as well as to challenge the status quo and the authorities. Cryptocurrencies have also fostered a sense of community and solidarity among Nigerians, as well as a spirit of innovation and optimism.

The Challenges and Risks of Crypto Adoption in Nigeria

Despite the benefits and opportunities that cryptocurrencies offer, there are also several challenges and risks that Nigeria faces as a result of its crypto usage. Some of the most significant ones are:

Regulatory uncertainty and hostility: The Nigerian government and central bank have been ambivalent and hostile towards cryptocurrencies, often issuing warnings, bans, and restrictions on crypto-related activities. In February 2021, the Central Bank of Nigeria (CBN) issued a circular that prohibited banks and other financial institutions from facilitating or providing services to crypto exchanges and users. This caused a disruption and panic in the crypto market, as well as a backlash from the crypto community and the public. The CBN later clarified that it did not ban cryptocurrencies, but only reiterated its 2017 directive that regulated entities should not deal with them. However, the CBN also stated that it was working on a regulatory framework for cryptocurrencies, which could either facilitate or hinder their adoption in the future. (In the latest update, CBN lifted the banking ban on virtual asset service providers that had been in place since February 2021. But banks and other financial institutions are still prohibited from holding, trading or transacting virtual currencies on their own accounts.)

Security and fraud issues: The crypto market is still largely unregulated and unsecured, which exposes Nigerians to various risks and threats, such as hacking, phishing, scamming, and theft. Many Nigerians have fallen victim to fraudulent schemes and platforms, such as Ponzi schemes, fake giveaways, and impersonations, that promise high returns or rewards in exchange for crypto deposits or payments. Many Nigerians have also lost their crypto assets due to negligence, ignorance, or lack of proper security measures, such as using weak passwords, storing private keys online, or trusting third parties with their funds.

Volatility and Complexity: The crypto market is known for its high volatility and complexity, which can pose challenges and difficulties for Nigerians, especially those who are new or inexperienced in the crypto space. The prices of cryptocurrencies can fluctuate significantly and unpredictably, depending on various factors, such as supply and demand, market sentiment, news and events, and technical analysis. This can result in huge profits or losses for Nigerians, depending on their timing, strategy, and risk appetite. The crypto market is also complex and diverse, with thousands of different cryptocurrencies, each with its own features, functions, and use cases. This can create confusion and overwhelm for Nigerians, who may not have the necessary knowledge, skills, or resources to navigate and understand the crypto market.