Chainalysis: Nigeria’s Economic Struggles Fuel Grassroots Crypto Adoption
Sub-Saharan Africa is the region with the smallest cryptocurrency economy, representing only 2.3% of the global transaction volume from July 2022 to June 2023. During this period, the region accumulated an estimated $117.1 billion in on-chain value.
No country exemplifies this better than Nigeria, according to blockchain Chainalysis, which ranks second overall on the blockchain analytical firm’s Global Crypto Adoption Index.
Other countries in the region ranking high on the index include Kenya (21), Ghana (29), and South Africa.
Sub-Saharan Africans Embrace Bitcoin, Stablecoins Amidst Inflation
The latest Chainalysis report shared with CryptoPotato revealed that Bitcoin holds more significant sway in Sub-Saharan Africa than any other region, with the world’s first cryptocurrency accounting for a larger share of transaction volume there. The reason Bitcoin gained such disproportionate traction in this region may be attributed to the fact that the crypto asset serves as an alternative store of value.
Many countries within the region have grappled with mounting inflation and debt, making cryptocurrencies an appealing option for preserving wealth, safeguarding savings, and seeking greater financial autonomy. For instance, Ghana’s inflation surged to 42.5% in June 2023 after numerous consecutive months of increases, marking the highest level in two decades.
With limited financial opportunities available, numerous Ghanaians have turned to Bitcoin. Similar economic challenges have been faced by Nigeria, Kenya, and South Africa in recent years, and all have witnessed substantial grassroots adoption of cryptocurrency – a correlation that is likely not coincidental.
Market participants in some regions have shifted their focus from Bitcoin to stablecoins due to the lower price volatility of stablecoins and BTC’s distance from its all-time highs.
Moyo Sodipo, Co-Founder and CPO of Nigeria-based exchange Busha, explained to Chainalysis that while Bitcoin was highly popular in 2019 and 2020, there is now a growing interest in stablecoins for diversification.
Despite these shifts, the demand for hedging against the devaluation of local currencies and economic decline remains strong, particularly in the context of the Nigerian Naira’s devaluation and ongoing economic challenges since COVID-19.
Nigeria Sees Altcoin Frenzy
Nigeria has faced two major recessions since 2016 due to political instability, the COVID-19 pandemic, and declining oil prices. These economic challenges have led to high unemployment and emigration of Nigerians to other countries.
The recent Naira crisis prompted the central bank to redesign the currency to combat inflation and counterfeiting and control currency circulation, further boosting cryptocurrency as a financial alternative in the country.
Data indicates that interest in Bitcoin and stablecoins has risen as the Naira’s value has declined, especially during steep drops in June and July 2023. Higher spikes in interest around May and November 2022 were likely driven by events like TerraLuna and FTX’s collapses rather than local economic factors.
Altcoin interest has been growing in the region, with fluctuations in market dynamics leading to buying frenzies.
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