Nigeria has emerged as a formidable player in the global cryptocurrency landscape, ranking second worldwide in crypto adoption between July 2023 and June 2024, according to a recent report by Chainalysis.
The remarkable growth is largely attributed to the increasing use of stablecoins in Sub-Saharan Africa, with the Nigerian economy leading the charge in a region beset by inflation and currency devaluation.
The Chainalysis report revealed that Sub-Saharan Africa recorded an impressive $125 billion in on-chain value during the past year, reflecting a $7.5 billion increase compared to the previous year.
The increase indicates the growing reliance on cryptocurrencies as a means of financial stability in countries with volatile local currencies, such as Nigeria, Ethiopia, and South Africa.
Stablecoins, such as USDT and USDC, have become vital for many African nations grappling with economic uncertainty.
In Nigeria, the naira has faced significant depreciation, hitting unprecedented lows in February 2024.
As a result, stablecoins now account for 43% of the region’s total cryptocurrency transaction volume, providing a reliable store of value amid rampant inflation.
Chris Maurice, CEO of Yellow Card, highlighted the role of foreign exchange (FX) shortages across the continent as a driving force behind this trend.
“About 70% of African countries are facing an FX shortage, and businesses are struggling to access U.S. dollars. Stablecoins offer a much-needed alternative,” he explained.
The report also indicated a direct correlation between the naira’s depreciation and the increased use of stablecoins, particularly for transactions under $1 million.
Inflows surged during periods of devaluation, illustrating the growing preference for these digital currencies.
Over the past year, Nigeria has received an estimated $59 billion in cryptocurrency value, with stablecoins comprising 40% of these inflows.
The increasing popularity of stablecoins can be attributed to their speed and affordability compared to traditional remittance methods.
According to the report, sending a $200 remittance via stablecoins is 60% cheaper than using fiat channels.
The landscape of Nigeria’s crypto activity primarily consists of smaller denomination retail transactions, with approximately 85% of the value of transfers received falling under $1 million.
Moyo Sodipo, co-founder of Busha, noted a significant shift in the perception of cryptocurrency in Nigeria.
“People are now beginning to witness the real-world utility of cryptocurrency, especially in day-to-day transactions, moving away from the idea that crypto is just a get-rich-quick scheme,” he said.
The rise of decentralized finance (DeFi) in Nigeria further bolsters the crypto economy. DeFi platforms are offering Nigerians unprecedented access to loans and opportunities to earn interest outside the traditional financial system.
In the past year, over $30 billion was transferred through DeFi platforms in Nigeria, showcasing the potential of innovative financial solutions.
While Nigeria leads the charge, South Africa is also witnessing a surge in cryptocurrency adoption. The nation received over $26 billion in cryptocurrency value last year, driven largely by institutional players.
