Crypto Adoption in Nigeria: Implications of a Stronger Naira for Economic Growth

According to tripleA data, Nigeria continues to maintain its position as a leading country for cryptocurrencies. As of May 2023, it estimates that the average global cryptocurrency ownership rate is 4.2% with over 420 million cryptocurrency users. Remarkably, this includes an estimated over 22 million Nigerians, which accounts for about 10.3% of Nigeria's estimated population of 223 million.

The cryptocurrency landscape is also robust in other countries. India boasts 100 million users, China has 58 million users, the United States has 45 million users, and Vietnam has 20 million users. However, Nigeria stands out as Africa's fastest-growing cryptocurrency market among developing economies and holds the position as the third-fastest-growing market globally as of Q3 2022.

Nigeria plays a pivotal role in driving crypto growth across Africa, as highlighted by a report from the US blockchain data platform, Chainalysis. The report places Nigeria in the 6th position worldwide in terms of crypto-related activities and usage, identifying Africa as the fastest-growing crypto market among developing economies and the third-fastest in the world.

The surge in crypto adoption within Nigeria can be attributed to several factors. Firstly, limited access to traditional financial services has compelled many Nigerians to turn to cryptocurrencies as an alternative means of financial inclusion.

Secondly, the depreciation of the national currency, the naira, has further propelled the interest in cryptocurrencies.

Thirdly, rising inflation has also played a role in driving Nigerians towards digital currencies as a hedge against economic uncertainty. Lastly, the resilience of Nigerians to weather any storm and their ability to thrive in difficult or novel situations.

A strengthened naira A stronger naira would have significant implications for Nigeria, considering its status as the most populous black nation, recent regime change, and commendable steps taken within a short period. Notably, with a reset of the foreign exchange market and the removal of subsidies on petroleum products, the pressure to rely on the dollar is expected to decrease. As a result, there are signs that the Nigerian currency, the naira, could strengthen.

With effective economic policies, prudent management of resources, and continued efforts to diversify the economy, a stronger naira stands to be instrumental in sustaining the positive trajectory and ensuring a stable and prosperous future for Nigerians.

This potential strengthening of the naira based on monetary policy reforms would be a remarkable development, highlighting Nigeria's and Nigerians' contributions to the global cryptocurrency landscape. Its impact is also likely to be felt sooner than other measures being introduced. A stronger national currency signifies economic stability, investor confidence, and improved prospects for international trade. It would not only bolster Nigeria's position within the crypto market but also enhance the country's overall reputation and influence on the global stage.

The implications of a stronger naira extend beyond the crypto sector but circle back to it when viewed from another angle. It would attract foreign investments, promote economic growth, and create a more favorable environment for businesses and individuals. Additionally, a stronger currency can lead to reduced import costs, increased purchasing power, and improved living standards for Nigerians.

Naira in crypto

Back to crypto, a stronger naira will impact how the country interacts with the emerging digital asset class within its market and beyond. This will be evident when viewed from the financial inclusion perspective, which has already been ongoing over the past years. Many Nigerians have been transacting in crypto, including for remittances and payments, P2P exchanges, as well as for speculative purposes, for some time.

The current state of crypto adoption in Nigeria indicates that a significant portion of the population is seeking alternative means of financial inclusion. With limited access to traditional financial services, cryptocurrencies provide Nigerians with a way to participate in the global economy and engage in digital transactions. After all, the digital currency

market is powering a parallel economy against the traditional financial system. With a strengthened naira, a wider spread in crypto adoption is sure to follow.

This leads to more economic opportunities for individuals, businesses, and the overall economy. A stronger naira opens avenues for entrepreneurship, job creation, and technological innovation as more individuals and businesses explore cryptocurrency-related ventures. This is particularly interesting considering that a lot is changing in Nigeria's financial landscape, e.g., loan facilities are popping up, unlike in previous years.

With cryptos being used for remittances and international transactions, a more efficient and cost-effective way is presented to Nigerians seeking to send and receive remittances internationally. Apart from its large diaspora population, cryptos could also come in handy within the African continent, where there has been a renewed call for member countries to ditch or at least reduce the use of the US dollar for intra-African trades in recent times. A strengthened naira can help facilitate faster and cheaper cross-border transactions for Nigerians and reduce their dependency on traditional remittance channels.

It could be argued that a stronger naira could dissuade Nigerians from seeking alternatives like cryptos to preserve their wealth. While a fair argument, the absence of currency depreciation in Nigeria may not prevent the need for an inflation hedge in Nigeria and elsewhere. The decentralized nature and potential of cryptocurrencies as a store of value will always remain features that will keep them attractive across borders.

All the above would likely result in or be accompanied by technological adoption and skill development. A stronger naira powering an increase in crypto adoption in Nigeria will necessitate a corresponding need for the right skills and fostering innovation within the country.

A strengthened naira will go hand in hand with regulatory considerations. Nigeria has seen a significant presence of cryptocurrencies, which cannot be ignored when introducing regulatory frameworks to ensure consumer protection, prevent fraudulent activities, and promote transparency within the crypto space. This will be healthy as a balance would be struck between fostering innovation as a way to develop the country and ensuring that the crucial instruments are there to support Nigeria's long-term growth in the cryptocurrency sector.

Conclusion

The majority of Nigerian crypto investors are below the age of 30, accounting for 52% of its investors, according to tripleA. As mentioned earlier, this percentage could potentially change with a strengthened national currency. Considering Nigeria's influential position across Africa and the growing interest in cryptocurrencies in other African countries, it is likely that a confluence will emerge in the near future.

Nigeria's prominence in the crypto space presents significant opportunities for economic growth and technological advancement, not only within the country but also beyond its borders. However, proactive measures are necessary to address potential challenges and ensure the responsible and sustainable development of the cryptocurrency ecosystem in Nigeria. In the meantime, fingers crossed on what’s to become of the naira.