The global cryptocurrency markets have been on a downward spiral since November 2021. Bitcoin plunged from its all-time high of over $67,000 to around $17,000 and currently trades for about $21,000. Most traders have become inactive as the crypto market has lost over $1.5 trillion in market cap. But in six countries, more than a third of the adult population buys or sells cryptocurrencies at least once a month, according to a recent report by Morning Consult.
In Nigeria and Turkey, more than 50 per cent of adult crypto traders are still active, putting both countries on top of the list of the 40 countries surveyed in the report.
Some of the world’s more developed countries are on the low-adoption end of the scale, with the UK, Germany, France, Japan, and China having just about 10 per cent of their adults as active crypto traders. Meanwhile, South Africa, Russia, and India are among the top 10. What is driving this high interest from Nigerians?
A match made in chaos
Nigeria, Pakistan, and India are in the top six of the world’s most populous countries and will each have more people in 2050, per the UN’s latest projections. So it is safe to tag them as emerging crypto markets. But the similarities between countries with high crypto adoption today are more monetary than demographic.
Except for the United Arab Emirates, most countries in the top 10 for crypto trading have per capita incomes below $30,000 (in purchasing power parity terms), which puts them in the lower-income spectrum. Nigeria is on the low end of that spectrum, with a per capita income of $5,000.
Crypto holders and traders are in it primarily to make money. Meanwhile, Nigeria has a largely unemployed young population. It has the third-highest official unemployment rate globally— nearly 1 in 3 young people has nothing to do. Nigerian university students have joined this idle congregation as the Academic Staff Union of Universities (ASUU) has been on strike since February 14. Crypto trading has become one of the ways these young Nigerians keep themselves busy and earn a living.
Also, seven of the top 10 countries, including Nigeria, have rigid controls on foreign exchange transactions. The most striking examples are Turkey and Argentina, two countries where inflation has shot up recently. In these countries, traders have been using crypto as a hedge against inflation until the recent crypto winter. In July 2020, several Nigerian banks reduced the spending limits on debit cards held by Nigerians at home and abroad. Stanbic IBTC bank, for instance, reduced the limit from $500 to $100, while Zenith bank cut the limit down to $200. Then in the first quarter of 2022, banks tightened the screws on international transactions using naira debit cards to $20-$50 per month. The aim is to hoard dollars since Nigeria’s foreign reserve has been on a steep decline. That’s not all. Last week, many African fintech startups offering virtual dollar card services sent emails to their customers stating that their virtual card service will be unavailable indefinitely. But people are bypassing these restrictions with cryptos. In the midst of the widespread announcement by fintechs, crypto payment startups like Bitmama took the opportunity to announce that their virtual card services are still up.
— ₿itmama.eth (@bitmamaexchange) July 15, 2022
While most crypto users are in it for profit, the Morning Consult report shows that they exhibit other traits that could be useful for fintech builders in Africa. For instance, crypto owners use more alternative financial platforms like non-bank apps than non-holders and are more likely to send remittances and take payday loans.
That said, policymakers and innovators still have plenty to learn about financial services in Nigeria. Last year, the Central Bank of Nigeria launched a central bank digital currency called the e-Naira a few months after restricting crypto transactions through banks. But today, people don’t use the e-naira, and crypto adoption has increased. It’s clear that crypto is not leaving the Nigerian scene anytime soon, and everyone will eventually have to fall in line. Other African countries, including Morocco and the Central African Republic, are taking sides with crypto.
