Cryptocurrency Usage in Nigeria and Kenya: What is Driving the Numbers?
By Tami Koroye
Africa is becoming a hub for financial technology investments, and one of the industries making this a reality is the crypto industry. The growth rate of the African crypto space has been nothing short of astonishing and impressive. Currently, the continent boasts the third fastest crypto ecosystem globally.
Going by the records of the crypto boom, Nigeria and Kenya have stood out distinctly as the two of the biggest crypto markets in the continent. Both countries were listed in 11th and 19th place respectively in the 2022 Chainalysis Global Crypto Adoption Index Report. At one point, Kenya topped the ranks as the country with the most peer to peer (P2P) cryptocurrency transaction volumes globally. Ironically, both nations do not recognise cryptocurrencies, but this has not stopped their citizens rushing to the crypto market. The question is, 'what is really driving the numbers?'
Nigeria is the most populous country on the continent, and she stands tall with abundant natural and human resources. In recent years, Nigeria's youthful population has found solace in cryptocurrencies as a means to navigate the nation's economic challenges. A significant portion of Nigeria's population, around 35%, aged between 18 and 60, have embraced crypto investments, with 52% of that group being under the age of 30. The country's high unemployment rate, currently at 33%, plays a role in driving this trend, as young individuals seek alternative ways to secure their finances beyond traditional white-collar jobs.
The increasing availability of affordable smartphones and the expanding coverage of mobile internet services have provided Nigerians with opportunities to embrace alternative financial solutions like cryptocurrencies. Mobile phone penetration in Nigeria has reached an impressive 45%, with a significant portion of the population—over 35 million people—using smartphones. These numbers highlight the growing access and use of mobile devices, creating a conducive environment for the younger generation, to easily access cryptocurrency platforms, conduct transactions, and stay informed about the latest developments in the crypto space.
The convenience of managing crypto investments and conducting transactions on the go has been a game-changer for Nigerians. With the instability of traditional banking applications and their frequent glitches, people have sought alternatives that offer greater reliability. The widespread adoption of mobile phones has played a significant role in this shift. Not only do Nigerians have access to affordable smartphones, but the strong presence of social media in the country has also contributed to the surge in crypto usage.
A notable example that showcased the power of cryptocurrencies in Nigeria was the EndSars protest in 2020. What began as a movement against police brutality on Twitter quickly gained momentum. As the Nigerian government cracked down on donation accounts supporting the cause, young Nigerians turned to bitcoin as a means to finance the protest. This highlighted the resilience and adaptability of Nigerians in leveraging cryptocurrencies to overcome challenges and support causes they believe in.
In addition to the aforementioned reasons, Nigerians have increasingly embraced cryptocurrencies as a safeguard against the country's surging inflation. The decision by the central bank to devalue the Naira during the pandemic amplified this trend, prompting more individuals to transition to cryptocurrencies. With growing mistrust in the stability of the Naira, cryptocurrencies have emerged as a viable alternative for preserving wealth and generating substantial investment returns.
What's intriguing is that the adoption of cryptocurrencies extends beyond residents within Nigeria. Nigerians in the diaspora have also embraced cryptocurrencies, particularly for remittance purposes, seeking to evade the arbitrary exchange rates, delays, and exorbitant transaction fees associated with banks and international money transfer operators. This shift highlights the appeal of cryptocurrencies as a faster, more cost-effective, and efficient method for cross-border transactions, especially for those looking to send money back home. Overall, the convergence of factors such as economic instability, the need for financial inclusion, and the desire for improved remittance services has fueled the rapid adoption of cryptocurrencies among Nigerians, both locally and abroad
In Kenya, a staggering 16% of adult internet users, approximately 4.8 million individuals, have joined the ranks of cryptocurrency owners. But what sets Kenya apart is its love affair with Bitcoin, surpassing the global average. A whopping 54.7% of crypto enthusiasts in the country proudly claim to hold this popular digital asset. Kenya's reception to technological innovations, such as mobile money with the success of M-Pesa, has contributed greatly to this seamless adoption rate, as the population has more digital financial literacy and familiarity with digital transactions. Kenya leads the way in mobile phone penetration across Africa, with an impressive 65.7 million mobile subscribers. In fact, it's not uncommon for Kenyan citizens to own not just one, but two mobile devices each.
Known as the Silicon Savannah of Africa, Kenya takes pride in being a frontrunner in internet connectivity, value-added services, and mobile banking solutions on the continent. Kenya has a thriving entrepreneurial culture, with many individuals engaging in innovative businesses and startups. Cryptocurrencies provide an alternative means of raising capital, conducting business transactions, and expanding entrepreneurial ventures, fostering a supportive environment for crypto adoption. Interestingly, there was a time when even the country's central bank contemplated leveraging Bitcoin as a reliable safeguard against inflation, particularly during periods of significant depreciation of the Kenyan shilling.
Like Nigerians, Kenyans in the Diaspora are also turning to cryptocurrency for remittance to avoid high transaction costs from centralised financial Institutions. Increased unemployment, coupled with a tech-savvy population and high internet penetration, has set the stage for a crypto revolution. Unlike Nigeria, where cryptocurrencies act as a lifeline in navigating challenging government policies and scrutiny, Kenya's crypto adoption is driven by a different force: convenience. Kenyans are drawn to the ease and simplicity that cryptocurrencies offer, making them an attractive alternative for financial transactions and investments. It's a testament to Kenya's forward-thinking spirit, where embracing technology has become synonymous with embracing progress.
Despite the blossoming crypto market, there is a lack of regulatory frameworks as the Central Banks of these countries have been wary of the potential risks associated with cryptocurrencies. This absence of regulation has resulted in the popularity of P2P exchanges, as both Central Banks have advised against sending money to cryptocurrency businesses from bank accounts, either by passing laws or instructing banks to restrict such transfers.
Unsurprisingly, the remarkable figures of crypto usage have sparked a flood of investments, technological advancements, and a proliferation of startups. With the necessary support from their governments, the crypto ecosystem in these nations has the potential to make significant contributions to their economic stability and overall growth.
Africa's growing youth population is embracing new technologies, and this characteristic has played a significant role in the adoption of cryptocurrencies. Economic instability in many African nations has also driven individuals to turn to crypto as a means of investing and safeguarding their assets. Additionally, the lack of robust financial infrastructure in Africa has created an opportunity for over 370 million unbanked Africans to access financial services through cryptocurrencies. As African economies continue to develop, people are seeking alternative solutions to their financial challenges, and cryptocurrencies have emerged as a viable option. Consequently, the crypto market is witnessing a surge in popularity as more individuals recognize the potential benefits it offers.
Tami Koroye is a licensed lawyer hailing from Nigeria. He holds an LLB from the University of Benin and a BL from the Nigerian Law School. He is also currently a PhD candidate at the university of Bradford where is focusing on digital currency for a monetary union.
Tami is passionate about the transformation of the financial technology sector and believes in the promotion of financial inclusion in Nigeria. As such, he is a member of various policy conversation panels that provide informed opinions to government organisations regulating the Fintech and Crypto services.
You can connect with him on Twitter @tammi_koroye