During the brutal police protests in Nigeria in October, Bitcoin saved the days when the government prevented protesters from using local payment platforms to raise funds to support them.
Young, tech-savvy protesters quickly switched to bitcoin, which was about 40% of the nearly $400,000 raised in about a week. This is just one famous example of how young Nigerians are increasingly using Bitcoin to manipulate the complex and restrictive banking and monetary system.
In the past five years, Nigeria has traded 60,215 bitcoins valued at more than $566 million. This is the world’s largest transaction volume for Paxful, the leading P2P Bitcoin market apart from the US. From early May 2015 to mid-November 2020, data collected by Coin Dance shows that Bitcoin transaction volume in Nigeria has increased at least 19% every year since 2017, with the highest transaction volume (20,504.50) trading in 2020.
During the country’s national lockdown this year, the highest peak in Bitcoin transactions was 30%, the highest transaction volume during the height of the pandemic. Paxful new registrations in Nigeria were reportedly up 137% between January and September.
The company said Nigerians had 1.3 million registered accounts, which is roughly a quarter of their customer base. “They use the platform primarily for peer-to-peer and arbitrage transactions,” said Nena Nwachukwu, regional manager of Paxful Nigeria. “Remittances is also a popular use case.” Nwachukwu stated that Bitcoin transfers are “cheaper and faster than traditional transfer companies”.
The increasing uncertainty and instability surrounding the Nigerian naira and the increasing divergence between the official and parallel exchange rates of the US dollar have created opportunities and practical reasons for Bitcoin transactions in Nigeria. The different exchange rate has long been a characteristic feature of the Nigerian economy. However, over the past five years, this situation has worsened as Nigerian tax authorities attempted to manage the supply of foreign exchange and “defend” the naira.
In recent years, other African countries, particularly Zimbabwe, have seen a surge in Bitcoin-led cryptocurrency transactions due to currency fluctuations and uncertain monetary policies. In some cases, the lack of a reliable local platform has limited trading.
Ray Youssef, co-founder of Paxful, said, “The lack of bitcoin liquidity is the first obstacle to bitcoin adoption in Africa.”
Bitcoin adoption could allow PayPal payment into Nigeria
Nigerians are usually restricted on international platforms like PayPal. PayPal does not allow payments into Nigeria, and local banks restrict international transactions and impose high fees on transactions due to a lack of US dollars.
Eleanya Eke, co-founder of Buycoins Africa, stated, “People want to be able to buy, sell and execute international transactions.”The more restrictions there are on traditional channels, the more people trade in cryptocurrencies and mostly Bitcoin. “And the best thing about it is that it’s almost impossible to stop. If you block the exchange it moves to Peer-to-peer platforms that are non-custodial.”
The increased awareness and availability of easy-to-use bitcoin platforms by Nigerians has significantly increased the country’s bitcoin liquidity, solving the first problem that hindered adoption. Nigerians can now use multiple formal and semi-official Bitcoin platforms, from international platforms like Paxful, Binance and Luno to local platforms like Quidax, and BuyCoins. Long-term observers, however, say that most transactions in the country are done through informal channels like Telegram or WhatsApp and WeChat.
Nigerian technology investor Osaretin Victor Asemota said, “On a global scale, there has been a shift from physical to online transactions.” “In Nigeria, agency transactions have increased dramatically due to bank closures. I think this change is inevitable. This is not a temporary pandemic growth. “
Due to the massive sell-off in global financial markets, the trading price of Bitcoin was just $3,600 in March and topped $20,000 for the first time this month. Although this value has risen in the past, it fell sharply a few weeks later, but some analysts have indicated that this growth could continue through 2021 as it appears to be due to the growing interest of institutional investors in cryptocurrencies.
Institutional investors like MassMutual and MicroStrategy are reportedly planning to buy hundreds of millions of dollars worth of Bitcoin, and the world’s leading online payments company PayPal recently added cryptocurrency to its functionality so people can use Bitcoin to pay online.