Crypto in Nigeria, a strong alternative to an unstable economy
Since the 2020 Pandemic, the cryptocurrency market has continued growing and attracting millions of investors and dollars in capitalisation while gaining a place in emerging markets. A recent survey revealed that 75% of investors in Asia-Pacific and Latin American countries are looking to increase their exposure to cryptocurrency investments. This is not surprising given that 32% of consumers trust cryptocurrency in emerging markets while only 14% do in developed economies.
The expected bright future for crypto results is from the socioeconomic context in these emerging markets. In regions such as Africa or Latin America, cryptocurrency is considered a strong alternative to unstable currencies (inflation, instability, price drops). In fact, in 2021, Argentina and Nigeria reached record figures in investment in cryptocurrencies resulting from the volatility brought about by COVID-19 and politics.
In the case of Nigeria, peak investments in digital currencies are an aftermath of the population’s need to feel protected from high levels of unemployment, black markets and the big volatility in the oil prices. Today 32% of Nigerians use cryptocurrencies, the largest proportion for any country in the world. This crypto boom took place despite the government ban in February 2021 announcing that banks should not involve in the crypto trade, alleging it was used as a tool to facilitate illegal deals. The fact is that the ban had little to no effect on cryptocurrency usage, and crypto users have found new ways to buy and continue their crypto trades.
At the same time, in October of the same year, a state digital currency was created to promote financial inclusion: the eNaira. This way, Nigeria became the first African country to introduce a digital currency, The eNaira enables peer-to-peer payments, cutting out the use of intermediaries, such as financial institutions and allowing cross-border payments faster and cheaper. Although the eNaira is built on blockchain technology, it is not a cryptocurrency since it is backed by the authority of the Nigerian government. Still, the introduction of this currency shows the urge of these emerging markets to find a solution to the ever-present dilemma of financial exclusion with an alternative means of payment, easy to use, less costly and safe.
Crypto Lending in Nigeria
Crypto lending is a promising alternative for Africans with unstable economies excluded from traditional finance or for those seeking immediate funding. Today there are 36% of unbanked Nigerians with an opportunity for inclusion. Unlike traditional credits, decentralised finance (DeFi) - the new, internet-native financial system using blockchains to replace traditional intermediaries - brings more transparency and a healthier financial system. DeFi can be a powerful tool to enhance financial inclusion, offering an alternative for people to access financial tools, regardless of their credit history.
Several Nigerian fintechs have begun to invest in crypto lending with democratisation and inclusion in mind. Bekonta is a Nigerian company that aims to bring opportunities to the most vulnerable by helping them gain control of their finances through blockchain. Through its platform, you can buy cryptocurrencies, invest them or request loans without the need for mediators as guarantors or credit history.
Koinwa is another platform built to provide financial services to the unbanked African population. This app enables a cross border peer to peer crypto trading, with a unique offering of providing crypto micro-loans with a credit score system.
Companies related to Agri fintech, such as MELD and Tengo Mobile, seek to provide greater opportunities for the region. Both aim to democratise and reduce the social exclusion gap by creating low-interest microcredit and highly efficient decentralised finance loans. The partnership of these two companies seeks to explore DeFi solutions that complement the eNaira currency.
Cryptocurrency lending platforms are here to stay, and they still have a long way to go as they are far from reaching their potential market. According to SourceForge, there are currently 191 firms engaged in crypto-based lending that African citizens and enterprises can access.
How can credolab help crypto lending?
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The crypto economy is leading toward developing an alternative financial and technological infrastructure. Read more about how cryptocurrency is one of the most well-known use cases for financial inclusion.