Nigeria has the second-highest interest in Bitcoin globally, trailing only behind El Salvador according to Google Trends data.
The West African country remains the most active Bitcoin adopter in Africa.
More than any other African nation, Nigeria has shown significant interest in digital assets such as Bitcoin and Ethereum, according to a study published by CoinGecko.
Data analysis indicates that the most populous nation in Africa will hold 658.8% of the cryptocurrency market share on the continent in 2023—nearly eight times more than the next most populous nation.
With a population of 223 million, Nigeria is currently one of the youngest countries in the world and one of the fastest-growing in Africa. According to the United Nations, the age group under 15 makes up 43% of the population.
Stablecoins like USDT are increasingly used by Nigerian businesses and the diaspora community to facilitate payments. It is now common for Nigerian tour operators to quote their packages in US dollars and accept USDT as a method of payment.
Despite recent challenges, Bitcoin has had a relatively good year. If 2023 were to end today, Bitcoin would have achieved a nearly 42% return.
Although Bitcoin and other digital assets have grown “extremely popular” for fund transfers and savings in recent years—particularly among the continent’s vast diaspora—they remain relatively uncommon for payments.
This is true even with the Federal Government’s tough regulatory climate, which prohibits banks from conducting transactions with unlicensed virtual providers.
Nigeria’s cryptocurrency market has, however, managed to establish itself as a major means of transacting in the sub-Saharan country. Yet, it is quickly losing ground to countries that are more accepting of cryptocurrencies, such as the UK, UAE, and Brazil.
The Federal Government is suing prominent cryptocurrency exchanges like Binance, and OKX—the second-largest cryptocurrency exchange by trading volume—recently announced it was withdrawing from the Nigerian market completely.
Binance ceased offering Naira peer-to-peer (P2P) transactions in the first half of this year.
Despite these setbacks, the Federal Government intends to use the cryptocurrency market as a source of tax revenue. KuCoin has started charging a 7.5% value-added tax (VAT) on transaction fees.
The Finance Act of 2022, which imposed a 10% tax on capital gains from digital assets, was Nigeria’s original plan to tax cryptocurrencies. The Act defined “all forms of property, whether situated in Nigeria or not, including options, debts, digital assets, and incorporeal property generally, as assets for this Act, subject to any exceptions provided by this Act.” However, the Act’s provisions were never implemented.
Nigeria is the second country with the strongest crypto adoption after India. As the economic situation began to deteriorate, Nigerians naturally turned to these online services to exchange their Naira for dollar-backed stablecoin cryptocurrencies, whose value is pegged to the North American currency.
Platforms like Binance allowed an unofficial exchange rate compared to the official one managed by the Central Bank of Nigeria. The more Nigerians sold Naira on these platforms, the more its value collapsed, while authorities attempted to curb this phenomenon on the official exchange rate. It is important to note that the crypto exchange platform was not the root cause of Nigeria’s current economic issues.
Platforms like Binance allowed an unofficial exchange rate compared to the official one managed by the Central Bank of Nigeria. The more Nigerians sold Naira on these platforms, the more its value collapsed, while authorities attempted to curb this phenomenon on the official exchange rate. It is important to note that the crypto exchange platform was not the root cause of Nigeria’s current economic issues.
After taking office, the new administration implemented some well-meaning but poorly executed reforms. Alongside the currency devaluation, they also decided to stop gasoline price subsidies that had long been a tool for controlling inflation.
It should be acknowledged that the federal government faced unforeseen security incidents that made their job much more difficult. Indeed, production and prices have been severely impacted by insecurity in northern Nigeria, a region plagued by Islamist insurgents and criminal gangs involved in kidnappings for ransom.
Recently, Quidax and Busha, two cryptocurrency exchanges, received approval in principle from Nigeria’s Securities and Exchange Commission, granting them the status of legally recognized cryptocurrency trading platforms in the country. Furthermore, the Commission announced that four businesses have been accepted into its Regulatory Incubation (RI) Program to test their models and technologies.