Is Nigeria stepping into El Salvador’s shoes? This update can clear the air

• Nigeria may legalize the usage of Bitcoin soon
• More people from the country were switching to cryptocurrencies as their economy faltered

As per an 18 December article by a Nigerian newspaper, the country could soon approve a law that would make Bitcoin [BTC] and other cryptocurrencies legal. This was made public by Babangida Ibrahim, the head of the House of Representatives Committee on Capital Market and Institutions.

These measure would recognize Bitcoin as acceptable investment capital and amend the 2007 Investments and Securities Act. Nigeria essentially outlawed the use of Bitcoin in February 2021 by forbidding authorized financial institutions from “dealing” with cryptocurrencies via a letter.

In the same year, data from Chainanalysis and Bitcoin Magazine indicated that Nigeria had significantly accelerated the adoption of Bitcoin. Additionally, it had reached the highest amount of peer-to-peer trading in the entire globe.

Nigeria thinking of Bitcoin regulations

Ibrahim reportedly stated,

“Like I previously remarked during the second reading, we need an efficient and flourishing capital market in Nigeria. Nigeria is falling behind in terms of regulating business. To do that, we must adhere to the most modern international standards.”

The new law may be a big driver for the most populous country on the continent of Africa if it effectively addressed the growing use of Bitcoin there.

Blockchain analytics company, Chainalysis, released its 2021 Global Crypto Adoption Index in October 2021, with Nigeria coming in sixth place. Inflation, depreciation of the naira, and lack of access to traditional money were some factors influencing the use of cryptocurrencies. 

According to data from April, more than a third of Nigerians between the ages of 18 and 60 invested in cryptocurrencies, as per a poll by cryptocurrency exchange KuCoin.

This was true even though the nation’s central bank forbade commercial banks from engaging in cryptocurrency trading in February 2021. Nigeria’s central bank claimed that it doing so as “a direct violation of existing law.” It forewarned that investing in cryptocurrencies carried dangers such as losing money on investments, money laundering, and financing terrorism.

By using fiat money to purchase Bitcoin on peer-to-peer exchanges, over two-thirds of the 360 Nigerian cryptocurrency investors, KuCoin studied did so. According to Chainanalysis, many users rely on P2P platforms not just as an entry point into cryptocurrencies but also to transport money overseas and conducting business.

So, why this demand for crypto?

Macroeconomic issues and a lack of financial inclusion were also encouraging Nigerians to trade cryptocurrencies. According to BPC, a financial technology company, 57% of Africans have neither a standard bank account nor a mobile money account.

In the meantime, annual inflation in April was 16.5%, the Nigerian Naira lost 60% of its value against the Dollar since October 2014.