Crypto transactions rise to $56.7bn as naira depreciates

Naira devaluation in 2022 pushed crypto transaction volume to $56.7bn year-on-year according to a report by Chainalysis.

This is despite a ban on crypto related activities in the banking sector by the Central Bank of Nigeria.

In February 2021, the CBN restricted cryptocurrency transactions in the country. In a circular, it stated, “Further to earlier regulatory directives on the subject, the bank hereby wishes to remind regulated institutions that dealing with cryptocurrencies or facilitating payments for cryptocurrency exchanges is prohibited.”

This was a nine per cent y-o-y growth recorded between July 2022 – June 2023, the firm noted.

It stated that the country’s crypto economy continued to grow despite market turmoil in the space. The firm noted that while Sub-Saharan Africa had the smallest crypto market, Nigeria ranked as the second-highest country in the world in terms of crypto adoption.

It said, “These dynamics are reflected in the data. On the chart below, we can see that interest in Bitcoin and stablecoins has generally risen as the naira’s value has decreased, particularly during the most recent extremely steep drops in June and July of 2023.”

The blockchain research firm added, “Nigeria boasts the largest population and economy in Sub-Saharan Africa, and as discussed above, the largest cryptocurrency economy as well.

“Perhaps even more notable is that Nigeria’s crypto economy continues to grow despite market turmoil. In fact, Nigeria is one of only six countries in the top 50 by size globally whose crypto transaction volume grew year-over-year in the time period we studied. Its growth rate of 9.0 per cent places it third among those six.”

According to the firm, citizens of the country were adopting crypto to preserve the value of their savings against rising inflation and debt.

It said, “The evidence suggests crypto is one solution to Nigeria’s economic challenges. Since 2016, Nigeria has suffered from two major recessions, fueled by an unstable political situation, the COVID-19 pandemic, and the collapse of oil prices.

“Consequently, Nigerians of all ages are facing high unemployment — more than 20 million people were looking for jobs in 2021 — and many are up and moving to other countries.”