During the police cruelty protests in Nigeria in October, bitcoin saved the day when the government shut down protesters from using local payment platforms for collecting donations to support it.
The young, tech-savvy protesters quickly changed to using bitcoin, and in about a week bitcoin accounted for about 40% of the nearly $ 400,000 raised. It was just one obvious example of how young Nigerians are increasingly using bitcoin to navigate a complex and restrictive banking and financial system.
In the past five years, Nigeria has traded 60,215 bitcoins, worth more than $ 566 million, excluding the United States, the largest volume worldwide on Paxful, a leading peer-to-peer bitcoin market. Scraped data from Coin Dance shows from early May 2015 to mid-November this year, bitcoin trade in Nigeria has increased every year by at least 19% in volume since 2017, with the highest volume (20,504.50) traded in 2020.
Bitcoin trade peaked at 30% this year during the national lockout period in the country and the highest volume traded during the height of the pandemic. Between January and September, Paxful reported a 137% increase in new registrations in Nigeria.
Peer exchanges (P2P), which are decentralized platforms that connect buyers and sellers directly without third parties are the most popular way to buy bitcoin in Africa because consumers do not have to worry about government cryptocurrency regulation. Paxful is the largest platform for P2P commerce in Africa and LocalBitcoins in June this year overtook the World’s Largest P2P bitcoin market, controlling 52% of market share.
The company says Nigerians make up about a quarter of its customer base with 1.3 million registered accounts. “They mainly use the platform for peer trading and arbitration,” said Nena Nwachukwu, regional manager of Paxful Nigeria. “Transfers are also a popular use case.” Nwachukwu says bitcoin transfers are “much cheaper and faster than using traditional money transfer operators.”
The growing uncertainty and instability around the Nigerian naira, which has had increasingly variable official exchange rates and collateral with the US dollar, has created a viable cause and use for bitcoin trade in Nigeria. Diversion rates have long been a striking feature of the Nigerian economy but more so in the last half decade as the country’s monetary authorities sought to micro-manage the foreign exchange supply and “protect” the naira.
In the past few years, other African countries, most notably Zimbabwe, have seen a large increase in bitcoin-led cryptocurrency trade, due to fluctuations in currency and uncertain monetary policy. In some cases restrictions to the trade have been driven by the lack of reliable local platforms.
“Lack of bitcoin liquidity was the first obstacle to overcome to introduce bitcoin to Africa,” said Ray Youssef, co-founder of Paxful.
Nigerians are often restricted on international platforms like PayPal, which does not allow payment to Nigeria, and local banks place a cap on international transactions and charge high transaction fees due to a lack of dollars.
“People want to be able to buy and sell, negotiate internationally and the more traditional channels are restricted the more people who trade crypto and bitcoin mainly,” explains Eleanya Eke, former co-founder of Buycoins Africa . “And the best thing about it is that it’s almost impossible to stop. If you block the exchange, it moves to non-prison peer platforms. ”
The increasing awareness and availability of easy-to-use bitcoin platforms for Nigerians has largely increased bitcoin liquidity in the country, thus solving the first problem impeding adoption. Nigerians now have several formal and semiformal bitcoin platforms to use, ranging from international platforms including Paxful, Binance, and Luno, and local ones like Quidax, Busha, and BuyCoins. Long-term viewers, however, say that most trading in the country is done on informal channels like Telegram, WhatsApp, and WeChat.
“Globally, there has been a shift to online transactions from the physical,” said Osaretin Victor Asemota, a Nigerian technology investor. “In Nigeria, as banks closed, the agency’s outlets recorded much higher transaction volumes. I think this change is inevitable, and it’s not a temporary pandemic boost. ”
This month, Bitcoin, which traded as low as $ 3,600 in March due to huge sales on global financial markets, surged past $ 20,000 for the first time. While in the past, the value has increased this way only to drop significantly later in a few weeks, some analysts say this increase could continue into 2021 as it appears to be due to the growing interest of investors institutional in the cryptocurrency.
Institutional investors like MassMutual and MicroStrategy were reportedly planning to buy hundreds of dollars worth of bitcoin, while PayPal, a leading global online payment company recently added cryptocurrency to its functionality, letting people use bitcoin to pay for things online.
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