Banks in Nigeria were forbidden to facilitate crypto transactions by the Nigerian Central bank last year, citing investor and economic safety.

Nigerians have subverted the ban through peer-to-peer (P2P) trades growing by 16% within a year, despite the ban hindering the growth of crypto trading in the African country.

A majority of crypto platforms in Africa have gained traction due to their ability to allow crypto enthusiasts to transact directly between themselves without having to go through a middleman. Bitcoin and other digital currencies have also gained traction largely due to the national currency and epidemic in the continent.

Currently, Nigeria is the biggest P2P market in Africa, with more than $400 million on two P2P platforms (Paxful and Localbitcoins). Kenya ranks second with more than $160 million and South Africa is third with $117 million. With over 20% growth in crypto adoption in Nigeria in 2021, it ranked higher than Malaysia, Australia, and the United States. Bitcoins can be traded peer-to-peer, but despite the decentralized nature of this form of trading, Africans are increasingly using their banks as a way to settle in cash.

Nigeria, however, has taken a counter-crypto stance, similar to many countries around the world. It has even attacked digital currencies proactively and harshly at times.

The Nigerian government realized its crypto ban had not stopped citizens from using the digital currency, so it launched its e-Naira central bank digital currency project last year after the backlash resulting from the ban.

The e-Naira achieved over 500,000 transactions within the first three weeks of the wallet's launch, and since then, the authorities have disclosed that it has witnessed high transaction volumes.

However, Nigerians are now paying a premium to acquire these digital assets due to the only legal option being P2P trading.

Nigeria, Africa's most populous country, is still interested in the crypto market and is therefore willing to pay a higher price to buy and store Bitcoin despite its Central Bank's ban on crypto transactions.

Pavan A

CBW - External Analyst

INDIA