Nigeria’s FX crisis fuels crypto usage as transactions hit $59bn

   Cryptocurrency usage continues to rise in Nigeria, driven by a weakening currency and soaring inflation, according to a report by New York-based blockchain research firm Chainalysis. The report, released Wednesday, revealed that Africa’s most populous country ranked second on the firm’s Global Adoption Index and received approximately $59 billion in cryptocurrency value between July 2023 and June 2024, a 4.06 per cent increase from the $56.7 billion recorded during the same period of 2023. Like many African nations, Nigeria faces a foreign exchange crisis, spurring crypto adoption. “About 70 percent of African countries are facing an FX shortage, and businesses are struggling to get access to the dollars they need to operate,” Chris Maurice, CEO and Co-Founder of Yellow Card said. The report highlighted that with banks running out of dollars, many Nigerians are turning to stablecoins. “The banks don’t have dollars, the government doesn’t have dollars, and even if they did, they wouldn’t give them to you,” Maurice added. Across Sub-Saharan Africa, crypto transactions totalled $125 billion during the same period. Chainalysis pointed out that Africans are using cryptocurrency for business payments, as a hedge against inflation, and for frequent, smaller retail-sized transfers. In Nigeria, crypto activity is largely driven by smaller, retail, and professional-sized transactions, with around 85 per cent of the value of transfers under $1 million. Moyo Sodipo, chief operating officer and co-founder of Busha noted, “People are starting to see the real-world utility of cryptocurrency, especially in day-to-day transactions, which is a shift from the earlier view of crypto as just a get-rich-quick scheme.” Stablecoins are a major part of Nigeria’s crypto economy, accounting for approximately 40 per cent of all stablecoin inflows in the region. Nigerians are increasingly relying on stablecoins to send money across borders due to the inefficiencies and high costs associated with traditional remittance channels. “Cross-border remittances are a major use case for stablecoins in Nigeria,” Sodipo noted. “It’s much faster and more affordable.” This surge in cryptocurrency activity comes despite the Nigerian government’s crackdown on crypto transactions in 2024, even after the Central Bank of Nigeria (CBN) lifted restrictions on digital currency usage in 2023. Using Binance as a scapegoat, the country asked telecommunication firms to restrict access to crypto platforms and directed operators to delist naira transactions. The government accused these platforms of encouraging the manipulation of the naira to dollar rates and aiding illicit flows. Despite these, crypto adoption has refused to wane, with peer-to-peer transactions playing a role in sustaining its growth. However, the government’s stance on cryptocurrency appears to be evolving because of the industry’s continued growth. Zacch Adedeji, chairman of the Federal Inland Revenue Service (FIRS), recently said, “We cannot run away from the cryptocurrency ecosystem because it is the in-thing. But as it stands in Nigeria today, there is no law that regulates cryptocurrency operations. We need a law that regulates that area of our economy.” In a positive step towards regulatory clarity, the Securities Exchange Commission has also begun approving principles for crypto operators. “The industry is bullish on Accelerated Regulation Incubation Program (one of SEC’s regulatory frameworks); it’s a shift away from uncertainty and a positive move towards regulatory clarity,” added Sodipo of Busha.