Bitcoin Adoption Increasing In Nigeria
With Speculators And Business Users Rushing In, Nigeria Might Be The Second Zimbabwe In Making
Manasseh Egedegbe, an investment manager based in Abuja faced extreme difficulties in making international payments in July 2016 and was caught fighting to stay aloft tensions caused by Nigeria’s dollar crunch. The revenue and foreign reserves of Nigeria had been shrinking at that time amidst an economic slump triggered by the fact that Central Bank of Nigeria (CBN) had put up currency controls for restricting dollar access. This posed as a big area of concern for Egedegbe, and a large number of fellow Nigerians. Out of desperation he sought out help from the crypto wave which had made Bitcoin the most viable option.
Egedegbe told Quartz that:
“I was able to use bitcoin to do just one transaction and then I got hooked.”
In the last 18 months, the adoption of Bitcoin has spiked in Nigeria for a large number of factors ranging from the need to make international payments to just simply wanting a slice of the lucrative cookie Bitcoin had evolved into. Peer-to-peer trading in Nigeria hiked up by approximately 1500% in the current fiscal standing second next to China. Statistics revealed by popular bitcoin exchange LocalBitcoin encompassing 200 countries has shown that the weekly trade volume in Nigeria had surpassed 1 billion naira ($2 million) in August.
Egedegbe says that “seeing the price skyrocket” has lured in a large number of Nigerians “who want a piece of the action.” The Nigerian scenario is not much different from that of Zimbabwe whose depleted foreign exchange markets and unstable economy caused locals to seek out Bitcoins as a safe haven of financial assets this year. There was a time few months back when the price of Bitcoin in Zimbabwe was the highest in the world and if the demand for bitcoins in Nigeria maintain its current growth trajectory, then it won’t be long till Nigeria boosts of the highest bitcoin price globally.
A growing number of local bitcoin exchanges have been providing impetus to the adoption of this cryptocurrency amongst masses. Timi Ajiboye co-founded Bitkoin Africa back in October after he faced some problems in transacting with cryptocurrencies in foreign exchanges. The difficulty in paying with a Nigerian card or account was the main reason behind Ajiboye’s decision of launching Bitkoin Africa to ease out local trading.
Tim Akinbo, the co-founder of another crypto trading exchange Tanjalo also founded in October feels that the main motivation behind launching exchanges was received from enabling technology and local application of cryptocurrencies amongst masses. Older players such as NairaEX, a bitcoin exchange set up in Nov. 2015 have also been plying the field. Irrespective of its growing adoption, the associated incredulity straight cut outweighs the enthusiasm. But this could not dampen the spirit of Ajiboye who fees that people can come to know more about the functioning of cryptocurrencies once the local exchanges start their operations.
It is really bemusing to note that Ajiboye was himself sceptical of cryptocurrencies but slowly found confidence in the same after gaining more knowledge about its potential. Akinbo feels that given the lack of “advanced financial infrastructure” in Africa, cryptocurrency technology can help fill in the gaps in a way similar to the local fintech companies which are coming up with new products and services. These exchanges shall serve as vital cogs in the dynamic infrastructure which will see cryptocurrencies unleashing its extreme potential in Africa. The first step however will be “allowing people to buy and own the currencies,” as per Ajiboye.
In spite of being in business for just two months, both these exchanges are scoring high transaction figures. The trade volume of Bitkoin Africa is increasing rapidly and have crossed more than half of its trade volume starting from its day of inception within the first ten days of December. Tanjalo on the other hand have achieved about $1 million trade volume as per Akinbo with “very little marketing.”
Shady Past Of The MMM Scheme
Mavrodi Mundial Moneybox (MMM), a Russian ponzi scheme belonging to two decades back have been credited for infusing the mainstream interest in cryptocurrencies amongst various African markets. MMM had more than two million Nigerian users at its peak stage in spite of facing warnings from the concerned authorities several times. In the past 18 months, MMM was also operational in Kenya, Ghana, South Africa and Zimbabwe. The playbook of this scheme is simple and stated that money can be invested by users who guarantee bringing in other into the same. A mammoth return along with 30% interest was promised within 30 days. But this scheme could not carry out its operation for long and came to an abrupt halt on December 2016 when its operations got suspended.
MMM users were estimated to have lost $50 million according to CBN following the crashing of the scheme. The following year MMM tried to relaunch its scheme by circumventing the regulator’s rules. It thus allowed users to receive and pay for pledges by using the bitcoin mode which was quickly followed up in many other parts of Africa. Scheme participants who were in the lookout for quick money making avenues latched on yet again promptly. Egedegbe revealed that renewed interest has come over time from both wealthy and middle-class Nigerians who are, “likely understand the technology better than the average man in the street.”
Although this is not similar to a Russian Ponzi scheme, a steep drop in the price of Bitcoin can bring upon widespread losses of the investors. Bitcoin has reached record heights in 2018 which have evoked further concern about it being similar to the dot-com bubble which was a widely discussed subject matter of the millennium. Akinbo is much more buoyant about Bitcoin’s future and agrees to its potential of facilitating cross border trade which can with time justify its increasing price. “When you look at it in terms of that potential alone, I’d say it’s undervalued,” he added. As far as the term “bubble” is concerned, Akinbo views the term as a phase wherein everyone is trying to get introduced to the phenomenon. “Just like any new technology, speculation is how this will find its footing,” he says.
A Bird’s Eye View
The bitcoin craze is mostly centred around the big-ticket predictions of its future potential. Possibilities ranging from those easing payments for availing international services to enhancing remittances have been discussed in Africa which can come as a significant boon for a large number of local economies. However, Akinbo feels that the most basic of these is the possibility of developing a system, “where everyone is permitted to participate” without facing any discrimination on the basis of origin or geo location. Ajiboye plans to expand the scope of Bitkoin Africa into other African nations next year onwards thus making it a real possibility to trade across Africa. He has been quoted as saying that, “it’s easier to send money from America to Nigeria than to send money from Nigeria to Gambia but the technology can power these things.”
Regulating Cryptocurrencies Amidst Widespread Warnings
Irrespective of the Bitcoin bubble bursting, its potential can be mitigated locally by imposing regulations. Although it’s very difficult for authorities to bring upon crypto regulation given the fact that they have little control over the same, companies providing services in regard to currencies can be regulated. Warnings have already been issued by Nigeria’s Central Bank (CBN) just like other apex banks worldwide about usage of cryptocurrencies. The very first warning came through a circular issued in January which citied the dangers associated with “money laundering and financing of terrorism.” The stance of the apex bank has softened off late in its approach towards cryptocurrencies. Departments have been set up in October for developing a report about the policy proposals of virtual currencies. The email sent by Quartz enquiring about the progress and submission date of the report has not yet been answered. With CBN pondering over its crypto policies, Akinbo advocates that it “remains flexible” through constant reviewing and tweaking which brings the same at par with global trends. As an alternative, the bank can suggest adopting and abiding by the policy which can quickly become archaic in an ever-evolving world. A sharp dip in the bitcoin price can trigger a wave of angst-ridden regulation. If such be the case then Osarumen Osamuyi, a Lagos-based developer hopes that the central bank does not adopt any “draconian regulation” which “will ultimately hurt innovation.”
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