In February of this year, Nigeria made to ban cryptocurrency within the country as much as it could. The Central Bank of Nigeria (CBN) ordered all banks to identify clients who had connections to crypto and close them immediately. Although the ban was commenced properly, it wasn’t quite successful as Nigerian investors turned to peer-to-peer transactions.
Compared to December of last year’s research, the worth of crypto in the country rose by 350% in May. Chainanalysis, the blockchain research firm that conducted the study, said that the dollar volume of crypto being received by the country just grew consistently from 2020 to 2021, partly due to the industry’s current bull market.
Looking for a regulated and trustworthy platform to start your crypto journey with? Look no further.
Peer-to-Peer (P2P)
At this, Nigerian youths have seized a relatively new investing window by exploiting peer-to-peer opportunities. After the crypto ban in the country, Paxful traded fund 23% more in bank transfers and 36% more in volume. Paxful is a cryptocurrency exchange platform that lets its users buy and sell crypto in real-time, giving them financial freedom without the need for intermediaries.
Aside from Paxful, LocalBitcoins is also one of the two most popular P2P platforms in Nigeria. LocalBitcoins’ Chief Marketing Officer Jukka Blomberg claimed that Nigerians traded 50% more than they did last year, increasing new client registrations at the same time.
The reason why users switched to P2P as a solution to the ban is that P2P makes it more complicated and less trackable for the government to observe how the money is being used as it’s going directly from user to user, their reasons being as practical as “paying rent” or “paying back a debt.”
Weakened Naira
Nigeria’s central bank decided to depreciate naira in response to growing pressure from external lenders, shortage of US dollars, and volatile oil prices, all of which have conspired to damage the country’s budget. Currency depreciation increases the competitiveness of exports and currency by making them less expensive to acquire. On the other hand, it raises the cost of imported products and contributes to inflationary pressures. As a result, purchasing power and domestic consumption frequently decline.
According to research, many young people who have lost trust in the naira’s future are increasing their USDT portfolios as an alternate savings vehicle to naira. This mentality, which is rapidly spreading as the middle class joins crypto exchanges for the sake of saving, may jeopardise the country’s capacity to mobilise funds for investment in the medium to long term.
Culmination
Nigerian cryptocurrency users are rapidly flocking to Bitcoin and other cryptocurrencies. The depreciation of the Nigerian naira has prompted some young locals to begin investing in crypto assets such as Bitcoin and Ethereum. Godwin Emefiele, CBN Governor, has stated that he will now “allow” the trade of Bitcoin and other cryptocurrencies. Many believe he had little option given the economic constraints on residents trying to save their purchasing power.
According to Damilola Odufuwa, Binance’s African spokesperson, Africa has witnessed a 386.93% growth in P2P trading volumes since January, adding that Nigeria is part of a broader regional trend. She also claimed that the continent’s user base increased by 2,228.21% over the same four months.
Closing Thoughts
It has been said that cryptocurrency is the best solution for developing countries, as the volatility just might potentially be a blessing to its users. A 1:1 crypto to US dollar coin sure does sound more appealing than a falling local currency. Although in this case, the government has chosen to weaken the local currency and cut off an alternative source of income for its citizens. One might think that the CBN is deliberately trying to mess with them.
It’s always crucial to remember that while crypto is a good alternative, it’s not as stable and regulated as traditional fiat currencies. It will do well for new and experienced investors to be wary of the transactions they’re handling and never invest more than what they can afford to lose.
Learn more about how you can join the “boom” in the crypto market here.