The Rise of Cryptocurrency in Nigeria
Nigeria, the largest economy in Africa, is now a global player in the cryptocurrency landscape. Despite regulatory problems and issues of fraud, the country's crypto market continues to expand, evidence of the complex tango between innovation, regulation, and economic necessity.
Nigeria has seen a sharp rise in cryptocurrency usage in recent years. It was found in an online survey conducted in 2020 that 32% of the sampled Nigerians used cryptocurrencies, placing Nigeria in the top ranks of global users. The Bitcoin/Naira is the most traded pair, though other cryptocurrencies such as Dash and Ripple are increasingly on the rise. (Source)
A number of factors explain this development:
- Devaluation of the Currency: The Central Bank of Nigeria has devalued the Naira a number of times, and that has made the citizens search for alternative stores of value. (Source)
- Cost of Remittances: Traditional remittance channels to and from Nigeria are costly, and hence, cryptocurrencies are preferable to them for remittances. (Source)
- Financial Inclusion: Cryptocurrencies provide financial services to the unbanked individuals, opening them to international markets without having to access traditional banking infrastructure.
Regulator Environment
The regulatory environment of cryptocurrencies in Nigeria has evolved over the years:
- 2017: The CBN instructed banks to halt cryptocurrency transactions, reflecting concerns of fraud and volatility. (Source)
- 2021: The CBN reiterated its stance, banning banks from facilitating cryptocurrency-related transactions. This move encouraged more peer-to-peer trading among Nigerians. (Source)
- 2024: SEC approved "Approval-in-Principle" for two exchanges, Busha Digital Limited and Quidax Technologies Limited, towards regulation and legitimation of the crypto space.
Despite these developments, there are issues. In February 2025, Nigeria sued Binance for $79.5 billion in economic losses and $2 billion in unpaid taxes, accusing the exchange of operating without a license and depreciating currency. (Source)
Fraud and Security Issues
The popularity of cryptocurrencies has been accompanied by an upsurge in fraudulent activities:
- Scams: Ponzi schemes like Mavrodi Mundial Moneybox (MMM) exploited Nigerians' high return aspirations and caused significant financial loss. (Source)
- Romance Scams: Scammers have exploited the use of cryptocurrencies to carry out scams, with the Economic and Financial Crimes Commission (EFCC) making several arrests.
- Exchange Frauds: Unregistered exchanges posing as legitimate ones have defrauded investors, prompting the SEC to issue warnings against them.
Binance Case
The world's largest cryptocurrency exchange Binance has weathered a nightmare in Nigeria:
- Top Executive Detained: In March 2024, Binance financial crime chief Tigran Gambaryan was detained in Nigeria on suspected money laundering and tax evasion. He was released on October 2024 on health grounds and diplomatic pressure. (Source)
- Ongoing Litigation: Aside from the economic damages and unpaid tax lawsuit, Binance also continues to face regulatory oversight in Nigeria, a reflection of the overall difficulty of conducting business in emerging economies with nascent regulatory frameworks.
Future Outlook
Nigeria's crypto space is at a fork:
- Regulatory Developments: The proposed investment and securities bill aims to establish a general framework for digital currencies with the potential of making it safer for investors.
- Economic Implications: As the Naira continues to face pressures of devaluation, cryptocurrencies also serve as both an inflation hedge and a tool for financial inclusion.
- Global Positioning: Nigeria's regulatory approach to cryptocurrency can serve as a model to other African nations, finding the balance between innovation and consumer protection.
In conclusion, Nigeria's journey to regulate its emerging cryptocurrency sector is a reflection of the dilemma of adopting financial innovation while maintaining economic stability. As the country navigates these challenges, the consequences will most certainly have implications on the broader application and regulation of digital assets in the continent.
