New York-based blockchain research firm Chainalysis has unveiled insights into the burgeoning adoption of cryptocurrencies in Nigeria, Africa’s largest economy, against the backdrop of a weakening national currency and soaring inflation.
In a report released on Tuesday, Chainalysis shed light on the remarkable growth of cryptocurrency usage in Nigeria, emphasizing the country’s resilience in the face of economic turbulence.
According to the report, Nigeria experienced a substantial 9 percent year-over-year increase in the volume of cryptocurrency transactions, reaching a total of $56.7 billion during the period spanning from July 2022 to June 2023.
This surge in crypto activity coincided with a period of profound economic challenges and currency devaluation in Nigeria.
While Nigeria took the spotlight with its remarkable cryptocurrency growth, the report also spotlighted other African nations. Uganda, for instance, demonstrated rapid crypto adoption, with transaction volumes surging by an impressive 245 percent to reach $1.6 billion during the same period.
However, in neighboring Kenya, crypto usage experienced a decline of over 50 percent, reducing total transactions to $8.4 billion.
The allure of cryptocurrencies in Nigeria became particularly pronounced when the value of the naira, Nigeria’s national currency, plummeted to historic lows.
This devaluation was exacerbated during the most severe economic downturns in June and July of 2023, a period marked by bold economic reforms initiated by President Bola Tinubu.
These reforms included the elimination of a popular yet costly petrol subsidy and the removal of certain exchange rate restrictions.
The co-founder of the Nigeria-based cryptocurrency exchange Busha, Moyo Sodipo noted in a statement shared with the report that “people are constantly looking for opportunities to hedge against the devaluation of the naira and the persistent economic decline since COVID.”
It’s worth noting that Nigeria had previously banned its banks and financial institutions from dealing with or facilitating cryptocurrency transactions in 2021.
However, last year, the country’s financial regulator introduced a set of regulations for digital assets, indicating a shift towards finding a balanced approach to managing crypto assets between an outright ban and unregulated use.
Nigeria’s tech-savvy and youthful population has embraced cryptocurrencies enthusiastically. Notably, peer-to-peer trading platforms offered by cryptocurrency exchanges have enabled Nigerians to circumvent financial sector restrictions while actively participating in the crypto ecosystem.
This surge in cryptocurrency adoption reflects the nation’s resilience and adaptability in the face of challenging economic circumstances.