Cryptocurrencies continue to be traded in Nigeria more than almost anywhere else in the world, reflecting a loss of confidence in more traditional forms of investment.
Success stories have attracted millions of Nigerians to digital currencies, such as Bitcoin.
A survey conducted by data platform Statista in 2020 revealed that 32 percent of Nigerians use cryptocurrencies, the highest percentage of any country in the world.
It is estimated that Nigeria ranked third after the United States and Russia in 2020 among the top 10 countries in terms of trading volumes, generating more than $400 million in transactions.
Although Nigeria has emerged from its second recession in less than five years, the difficult economic climate remains, making alternative sources of income and alternative currencies attractive.
The Central Bank of Nigeria devalued the official currency by 24 percent in 2020, and there are fears of a further decline in value of up to 10 percent this year.
Meanwhile, prices continue to rise, with food inflation rising to its highest level since July 2008.
When Michael Ugwu, founder of a media company in Lagos, sold land in 2018, he knew he needed to explore new investment opportunities.
Although its profits increased in local currency terms, the price declined compared to its value in US dollars due to the depreciation of the currency.
I gained in local currency but lost in USD and that’s when I realized we were going backwards and started looking for Bitcoin.
Michael Ugwu.
The move to invest in digital currencies paid off, as he made a profit in some of his currencies 50 times what he invested, and Bitcoin grew 10 times in the year 2020.
The former banker sees cryptocurrency as an evolution of finance, and despite the currency’s volatility, Ugwu sees it as a valuable tool to hedge or reduce the risks of living in what he describes as a high-risk environment.
His wife started investing when she faced high commission fees for transferring money between her Nigerian and British accounts.
It wasn’t about making money, it was about how to have a better banking experience, and save money through a currency that can maintain the value of money.
Michael Ugwu’s wife.
Despite their appeal, economists around the world warn that Bitcoin and other cryptocurrencies are high-risk investments.
There are legitimate concerns that Bitcoin’s rising value is a speculative bet that will one day leave many miserable.
It is a financial product with significant potential regulatory risks, and governments and central banks have not yet decided whether they can or should regulate it.
I’m not sure on a technical level that the security you’re using is completely foolproof, and I think there are still some technical uncertainties.
International banker based in Nigeria.
In an attempt to regulate the market, the Central Bank of Nigeria banned banks from facilitating cryptocurrency-related transactions in 2017, but the ban has remained largely unenforced.
The Central Bank of Nigeria stated on February 7, 2020, indicating the need to protect the people and the country from potential threats posed by unknown and unregulated entities suitable for illegal activities.
Many investors say they continue to trade using their offshore bank accounts and can easily return to peer-to-peer transactions.
This means that instead of transferring funds between a financial institution and an online cryptocurrency trading platform, investors transfer funds directly to each other or through an intermediary person while buying and selling.
The cryptocurrency community in Nigeria used this method before the development of the country’s virtual currency market ecosystem.
Nigerians see cryptocurrencies as a way to get around foreign currency restrictions, as there are a lot of restrictions on what can and cannot be done with foreign currency, and they find it easier to use cryptocurrency as an investment tool.
