Despite the Nigerian government's ban on financial institutions holding and trading cryptocurrencies, it appears to have limited control over private transactions among its citizens.
Statistical data reveals that Nigeria has the highest proportion of cryptocurrency ownership globally. Coupled with a challenging economic environment, the country has become a fertile ground for crypto market growth.
Industry experts note that cryptocurrency markets meet certain financial needs in underdeveloped regions while also presenting regulatory challenges for governments, alongside inherent risks.
Cryptocurrency Landscape in Nigeria
A 2020 survey by data platform Statista found that 32% of Nigerians have held or used cryptocurrency—the highest rate worldwide. Vietnam and the Philippines followed with 21% and 20%, respectively, while the United States reported only 6%.
If online surveys have limitations, recent trading volumes provide even clearer evidence of this trend.
According to Bitcoin data tracker Coin Dance, Nigeria ranked among the top 50 countries and regions globally for LocalBitcoins trading volume in the week ending August 17.
As Africa’s most populous nation, Nigeria is home to 206 million people, accounting for 18% of the continent's population. It also boasts the largest economy in Africa, with a GDP of $432.3 billion in 2020.
Professor Hu Jie from Shanghai Advanced Institute of Finance at Shanghai Jiao Tong University notes that Nigeria’s substantial economy and large population make it a significant player in the global cryptocurrency market.
Despite being Africa’s largest economy, Nigeria faces severe economic challenges—a key reason behind the widespread adoption of Bitcoin and other cryptocurrencies in this West African nation.
The oil industry is Nigeria’s primary source of revenue, but volatile international oil prices have severely impacted the country’s finances. The COVID-19 pandemic further exacerbated the situation, causing oil prices to plummet and worsening economic conditions.
The inflation rate in Nigeria has remained persistently high, consistently exceeding 15% this year. According to the latest data from the National Bureau of Statistics, inflation reached 17.8% in June 2021 and climbed to 18.2% by March—a four-year high.
In this economic context, many Nigerians have turned to Bitcoin as an investment vehicle. With the local currency, the naira, continuously depreciating, Bitcoin’s appreciation offers a hedge against inflation.
Professor Hu also pointed out that cryptocurrency markets serve as a partial substitute for traditional financial services. "When traditional financial services are underdeveloped, the demand for alternative financial solutions increases."
Moreover, compared to cross-border transfer fees that can reach 10%, the low transaction costs of cryptocurrencies like Bitcoin make them an attractive option for international payments.
Political factors have also contributed to the rise of cryptocurrency usage. During the "EndSARS" protests in Nigeria last year, activists used Bitcoin to raise funds against police brutality, sparking a surge of interest in digital currencies.
Major Players in the Nigerian Market
Peer-to-peer (P2P) trading is the most common method for cryptocurrency transactions in Nigeria. Several local exchanges support the buying and selling of digital currencies using the naira. Nairaex, for instance, is one of the largest local crypto exchanges.
Binance also offers services in Nigeria. In 2019, Binance introduced the Nigerian naira (NGN) as its first fiat on-ramp, allowing users to purchase BTC, BUSD, and BNB directly with local currency on its platform.
Additionally, the Africa Stable-Coin (ABCD), the first stablecoin pegged to the Nigerian naira, was launched on the Binance Chain.
Another notable platform is Bitpesa, which facilitates cross-border Bitcoin remittances. Nigerians can use Bitpesa to buy Bitcoin via credit or debit cards.
Regulatory Challenges and the Ban
Despite the popularity of cryptocurrencies, the Nigerian government has attempted to curb their use. As early as 2017, authorities prohibited financial institutions from holding or trading cryptocurrencies.
The Central Bank of Nigeria (CBN) reaffirmed this policy in February of this year. In a circular dated February 5, the CBN directed banks and other financial institutions to close all accounts involved in cryptocurrency transactions and refrain from facilitating crypto-related payments. It warned that non-compliance would result in "severe regulatory sanctions."
The underlying message of these directives is clear: exclude cryptocurrencies from the formal financial system.
However, the government appears to exercise less stringent control over private cryptocurrency use and trading. Professor Hu noted that Nigerian authorities have maintained a relatively tolerant stance toward alternative financial activities outside the traditional banking system.
"Cryptocurrency markets offer new hope for financial inclusion in less developed regions and partially address local financial needs," he observed.
Nevertheless, Hu also emphasized that this situation creates regulatory blind spots, accompanied by unavoidable risks. As repeatedly highlighted by Nigerian regulators, there are legitimate concerns about cryptocurrency being used for money laundering, fraud, and other illegal activities.
Frequently Asked Questions
What percentage of Nigerians use cryptocurrency?
Approximately 32% of Nigerians have held or used cryptocurrency, the highest rate globally according to a 2020 Statista survey. This reflects widespread adoption despite regulatory restrictions.
Why is cryptocurrency so popular in Nigeria?
High inflation, a depreciating local currency, and limited access to traditional banking have driven many Nigerians to use cryptocurrencies as a store of value and medium for cross-border transactions.
Is cryptocurrency legal in Nigeria?
While financial institutions are banned from dealing in cryptocurrencies, individual trading and ownership remain largely unregulated. The government focuses on preventing illegal activities rather than prohibiting personal use.
What are the main risks of using cryptocurrency in Nigeria?
Users face potential volatility in crypto markets, security concerns, and the risk of engaging in unregulated transactions. Regulatory changes could also impact accessibility in the future.
How do Nigerians buy cryptocurrency?
Peer-to-peer platforms and local exchanges like Nairaex are popular. Some international platforms, including Binance, also support direct naira transactions for buying cryptocurrencies.
Can cryptocurrency help with remittances?
Yes, cryptocurrencies offer a low-cost alternative for cross-border transfers compared to traditional services, which often charge high fees. This makes them appealing for remittances and international payments.
For those interested in exploring secure and efficient methods for digital asset transactions, you can discover reliable trading platforms that cater to global users. Additionally, to learn advanced investment strategies in evolving markets, comprehensive educational resources are available online.