Nigerian Crypto Investors Defy Crackdown To Ride Bitcoin Frenzy

With savings of just under $ 80 and a salary of $ 50 per month, Promise Nwabueze, a social media manager in Southeast Nigeria, decided to invest everything he had in crypto. -change. The bet paid off. In a few months, his savings have increased fivefold. They have continued to increase since.

“Currently my total net worth is $ 2,500 – I’m sorry for being so excited, but it’s amazing,” he laughed as he spoke by phone from Benin City, where he taught a class on crypto trading. “Now I teach so many people because the idea is to [people] in Nigeria. “

Africa may have the world’s smallest crypto market, with just 2% of global trade, according to a 2020 report by U.S. blockchain research firm Chainalysis. But, with the bitcoin value In circulation just under $ 1 billion and each bitcoin sells for around $ 50,000, it has the highest proportion of retail users transacting under $ 10,000, according to Chainalysis.

Promise Nwabueze: “ We are the poverty capital of the world ”

Some observers, including the Central Bank of Nigeria, have expressed concerns that inexperienced investors could lose their meager savings by playing in a highly speculative asset. “Small retail investors and unsophisticated investors also face a high probability of loss due to high investment volatility lately,” the bank said, as it sought to clamp down on the trade. Bitcoin had an equally wild recovery in 2017, then plunged 80% from its peak.

But Idayat Hassan, head of the Abuja-based Center for Democracy and Development, said the crypto rally has been so strong that “citizens are not concerned about the potential losses but rather the immediate gains they make. . . because they don’t lose ”. There is a feeling of euphoria in part because it “gives young people hope and represents opportunities” in a country where unemployment is rampant, she said, noting that even her father was interested in the job. cryptocurrency trading.

“We are the poverty capital of the world,” Nwabueze said, explaining the popularity of cryptocurrencies. “The economic strength of our country is not really encouraging – our GDP, our inflation, our unemployment are on the rise and the available jobs are not really paying enough to put food on your table.”

Nigerians turned to bitcoin when the government froze the bank accounts of leaders of the EndSARS protests against the police brutality that swept the country last fall. Supporters began to donate to the cause using Bitcoin, a practice encouraged by people like Twitter CEO Jack Dorsey.

Protests calling for the scrapping of Nigeria’s controversial SARS police unit last year, funded in part by donations of cryptocurrency © Pius Utomi / AFP via Getty Images

The frenzy over digital currencies prompted the central bank to reiterate 2017 guidelines banning local banks from serving customers with crypto accounts. In a note this month defending its decision, the bank argued that cryptocurrencies were susceptible to being used by criminals, drug traffickers and terrorists. But the message from the central bank “had the opposite effect the CBN wanted it to have,” said Ibukun Akinnawo, who hosts an investment club mostly Nigerians 9 to 5 on the network app. social Clubhouse and invested in digital currencies. “People now really wanted to talk about crypto.”

In the wake of the crackdown, Nigerian traders have turned to peer-to-peer marketplaces, which allow users to sell digital money to each other in exchange for real money or other digital currencies.

Yele Bademosi, the founder of Bundle, a Nigerian cryptocurrency and cash payment app, said volumes on his exchange remained high after the central bank move because people relied on peer-to-market markets. -peer. He said the CBN crackdown could push crypto into the Nigerian naira, the local currency in which there is a thriving black market. “It will look a lot more like the forex situation in the parallel market,” he said.

Victor Asemota, a longtime investor and leader in the Nigerian tech scene, attributed the demand for cryptocurrencies to CBN efforts to support the naira. These efforts have been criticized by the IMF and the World Bank. Officially, the naira is trading at around 380 to the dollar, compared to around 470 on the black or parallel market.

Official Nigerian Naira Notes. A senior bank official said the central bank’s policy of reducing demand for cryptocurrency has annoyed “ the children. ” © KC Nwakalor / Bloomberg

He argued that the bank’s latest statement would affect the already low foreign investment in Nigeria, alarming investors who might have thought of using digital currencies to repatriate funds. “What everyone has always feared is that the policies of the Nigerian government are inconsistent,” Asemota said. This decision shows that “the government is totally disconnected from the economy”.

A senior bank official said the CBN policy had annoyed “the children”. “They are mad! They see this as a deliberate attempt by authorities to stifle their financial independence, especially given the role crypto played in the EndSARS protest, ”he said. “For the rest of us gnarled old cynics, it’s just normal for the CBN to shut down everything and everything that they don’t understand or can’t fully control.”

For now, investors are optimistic about the risks of losses, focusing instead on the possibilities offered by cryptocurrencies. Chinyere Ofoegbu, 30, saved $ 150 while working a desk job that paid $ 210 a month, invested in crypto, and says she saw her savings increase. “I’m not the type to denigrate my country, but it can be really, really hard to be Nigerian and to live in Nigeria,” she said. “These people have a lot of responsibility and don’t want to commit fraud. . . people are therefore looking for safe and healthy alternatives. And that’s where cryptocurrency comes in. ”

Nwabueze warns his students about risks and makes it clear that he does not offer financial advice to avoid liability. But “losing is part of the game,” he said. “If you don’t lose, you can’t win. If you don’t want to lose, put your money in the bank and get your 2 percent. But if you [ want] to earn money, know that it will be difficult.

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