Cryptocurrency, more than a complex term has become a phenomenon present in everything related to progress, and technology. It was started with the sole purpose of peer to peer exchange of money and it grew into something multi dimensional. Bitcoin has been spearheaded by several African countries, and Nigeria was one of them.
At the beginning of the year, the Central Bank of Nigeria disregarded Bitcoin as a legal tender. Consequently, the market for Bitcoin fell.
The following article gives an insight into the potential for digital currency in Nigeria that has been dismissed on grounds of possible fraudulent activity and anonymity of users.
According to the Wall Street Journal, creating a connection between Bitcoin and terrorism is plain exaggeration. All transactions that take place using Bitcoin is recorded in the blockchain, making it easy to trace back any suspicious movement of cash. The unreliability narrative of the Bitcoin is simply pushed by governments.
Bitcoin is just as much as a political tool as an economic tool because it does not have any external source of control and is transparent. Nigerians adopted this new money in hopes of democratising the economy. The unreliability of the Nigerian government led to the rise in use of Bitcoin as an act of insurgence. An act against the political interests of the oligarchs, and corrupt parties.
The Bitcoin surge emerged in Nigeria because of Ponzi schemes, most popularly, the MMM. This Russian Ponzi scheme had over two million participants in Nigeria. Despite the risk of dealing with Bitcoins, residents decided to overlook it owing to weak economic conditions. If the citizens of Nigeria were willing to get involved with a Ponzi scheme to deal with Bitcoins, a more reliable platform could’ve been encouraged amidst them, if it weren’t for the ban. The Central Bank of Nigeria started drawing negative assumptions of Bitcoin, when people lost money owing to Ponzi Schemes, and consequently deemed it an unnecessary, ill-fated monetary tool.
Around 2015, Citibank noticed the popularity of Bitcoin and realised that this technology was there to revolutionise markets rather than disrupt, and thus decided to start their own Cryptocurrency to simplify storing large sums of cash. And with one of their branches located in Nigeria, the bank believed this move to be more than complementary to the then emerging bitcoin market. Being adopted by the banking system highlighted its serious acknowledgment of digital currency.
In February 2017, Bitcoin was observed to be at its peak. It was the most searched term on Google in Nigeria. Trading around that time had spiked on localbitcoins.com topping 400m NGN weekly. The bitcoin exchange rate reached 500,000NGN on some Nigerian exchanges. Nigeria was placed to be the 16th most traded currency for Bitcoin, and now it has fallen to be the 20th. Nigerians found Bitcoin to be a safe alternative asset against the volatile Naira, because of the nation’s oil crisis and consequent economic instability. Nigerian investors with Naira bonds would otherwise be seen hedging against the fluctuating value of Naira in Nafex.
With increased number of Wallets downloads, Nigerians used Bitcoin to send money to family and friends at home. This mode of transferring money had been a cheaper option in comparison to doing so via Western Union, Ria or MoneyGram. Bitcoin doesn’t require any so called ‘fees’, so long as the receiving end has a bitcoin wallet.
Sending money via any of the aforementioned sources is a lot more expensive owing to their vast profit margin. Considering Western Union for example, the fee starts at one dollar (363.5NGN), which is subject to additional charges with respect to the exchange rate. And evidence has emerged of Western Union not being faithful with disclosing their exchange rates.
Bashir Aminu created Cryptogene, a startup, to educate the general public on Cryptocurrency and make them accustomed to a competitive and technologically thriving environment. Similar motives were encouraged by Luno, the continent’s biggest Bitcoin Exchange, by incorporating a learning portal.The building blocks towards a Bitcoin embedded economy were steadily in place with joined efforts by its people.
With various aspects of the economy covered prior to the ban, it is evident that the market for Bitcoin may not have had a solid shape, but it was definitely in the making.