Why cryptocurrency is all the rage in Nigeria

Cryptocurrencies are all the rage in Nigeria. So much so that Nigeria has grown into the world’s third largest cryptocurrency market in terms of trading volume on a yearly basis.

Most of this growth can be attributed to consumer habits and beliefs that have been cultivated from a general distrust of traditional banking and investment opportunities. Some of these consumer habits and beliefs include:

The Extensive Use of Peer-to-Peer Payment Systems 

It is expensive to send money to people using traditional banking services in Nigeria. It is so expensive that many people cannot afford to send money to people using these banking services.

To get around these problems, many Nigerians use peer-to-peer payment systems to send cryptocurrencies internationally and to pay for things they purchase locally. The cost to use these payment systems is often much less than what banks charge for similar services. As a result, more people have access to banking functions that make everyday transactions easier to complete. 

Moreover, many firms have recently added customizable phone plug-ins to their peer-to-peer payment systems that allow customers to pay for their purchases using cryptocurrencies. This innovation has created a scalable peer-to-peer payment system that offers even lower transaction costs for consumers who use it on a regular basis.

A General Belief That Nigeria’s Currency Will Continue to Lose Its Value 

In order to reduce exchange rate volatility that attracted many speculators, Nigeria’s central bank devalued its currency by 24% in 2020. Most Nigerians believe that this devaluation will continue for some time to come as Nigeria’s central bank continues to grapple with international market forces that continue to put downward pressure on Nigeria’s currency.

This devaluation has caused the value of many real assets such as natural resources, precious metals, oil, and real estate to drop sharply in value against the US dollar. It has also caused a sharp increase in prices for food and other everyday items that has exacerbated Nigeria’s recent inflation problems. 

Many Nigerians are hedging against these harmful effects of currency devaluation by buying well-known cryptocurrencies that are usable for purchasing items using peer-to-peer payment systems (see above) and secure digital wallets. Some of the most popular cryptocurrencies for this purpose include Bitcoin, Dash, and Ethereum.

 A General Distrust of Traditional Investments Also Fuels Demand for Cryptocurrencies 

Many users of cryptocurrencies in Nigeria do not trust investing in traditional investments such as stocks, bonds, and certificates of deposit. This problem is a direct result of a deeper mistrust of formal and centralized financial systems that have been hampered recently by poor economic conditions and bad government economic policies.

To rectify this problem, many Nigerians invest directly in cryptocurrencies called stablecoins that are backed by a real or tangible asset. Cryptocurrencies such as True USD are especially popular for this purpose because it is backed by the US dollar. 

As time goes by, perhaps we will see the development of better stablecoins that offer more investment choices for these investors? Until then, Nigeria will continue to lead the way using traditional cryptocurrencies that offer valuable alternatives to traditional investments and banking services.  

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