Cryptocurrency in Nigeria
Cryptocurrency in Nigeria describes the extent of cryptocurrency use, social acceptance and regulation in Nigeria. Nigerians are one of the major global users of cryptocurrencies. Prevalence The most traded pair is Bitcoin/Naira, and other cryptocurrencies popular in Nigeria include Dash and Ripple. With a total cryptocurrency transaction volume amounting to $400M, Nigeria ranks third after the United States and Russia according to 2020 estimates. According to a 2020 online survey, 32% of participating Nigerians used cryptocurrencies. At least as of late 2020, cryptocurrencies in Nigeria are a parallel and smaller system to the official Naira which the public still assigns importance to as the official currency. Researchers at the Central Bank of Nigeria suggest that rather than threatening the importance of the Naira, Perception Bitcoin was initially looked upon with scepticism and associated with ponzi schemes such as Bitconnect, OneCoin and Mavrodi Mudial Moneybox (MMM). Scams were commonplace in Nigeria and Bitcoin was often used as a tool for the victims of the scams to make payments as such Bitcoin was not separated in the perception of the people from these scams. Over time, these negative associations lessened due to factors that promoted the use of Bitcoin and cryptocurrencies. Factors that promote use The official exchange rate in Nigeria of the Naira to foreign currencies is set by the Nigerian Central Bank, and thus not by forex markets. The central bank tends to devalue the Naira against other currencies. This devaluation is a factor that causes Nigerians to look elsewhere to preserve the value of the money they earn. In 2020 the Central Bank of Nigeria decreased the value of the Naira by 24%. Transferring money from and to Nigeria is very costly using the traditional banking system, and cryptocurrency provides an alternative to the high fees experienced there. Following the freezing of bank accounts for cryptocurrency-related activities, many Nigerians have said they will continue to use cryptocurrencies where they can and that they will switch to using peer-to-peer transactions These bypass traditional banks entirely because cryptocurrencies are sent from one person decentralised wallet to another. Similarly, people have had their bank accounts blocked by authorities for participation in the End SARS anti-police brutality protests, leading to increased use of digital currencies with bitcoin trending on Twitter at the time of the protests. Legality The Central Bank of Nigeria Act 2007 gives the central bank, Central Bank of Nigeria (CBN) the right to issue Nigeria's legal tender which is legally prescribed to be the Naira. The act also gives the CBN the sole right to issue Naira and the right to determine the exchange rate of Naira to other fiat currencies. At the time the laws were passed, cryptocurrencies did not exist and thus there is no legal framework addressing cryptocurrencies, nor can they be considered legal tender according to existing laws. In 2016 the Nigeria Deposit Insurance Commission (NDIC) and the CBN set up a commission to look into Bitcoin after it became a relevant topic following the shutdown