$500 million. That’s the amount of money Nigerians spent buying and holding crypto-currencies in 2020, making it the third largest market for cryptocurrencies in the world. The numbers are hardly surprising, cryptocurrencies are mostly marketed by digital exchanges as a way to make a lot of quick money, making it an ideal fit for the cultural and economic realities of a lot of Nigerians.

Nigeria has about 80 million poor people, but the people most responsible for these numbers in cryptocurrencies aren’t exactly the poor, it’s the ever-contracting Nigerian middle class throwing all they’ve got to avoid slipping into poverty in a country marred by food and currency inflation, unstable exchange rates and monetary policy and worsened by the effects of the pandemic on the white-collar jobs supporting this middle class.

CRYPTO AS AN INVESTMENT AFRICA

The reason why cryptocurrencies aren’t a viable investment for the vast majority of the class of Nigerians most invested in it goes beyond its famed volatility and risk. Investment in cryptocurrency is based on pure speculation, nothing else. With other investments, it’s easy to make stable projections on what the outlook of the company would look like in a few years by looking at their numbers, or by appreciating the demand in what they offer.

With Agro-investment platforms you’re sure of returns on your investment because they produce an economic output of value, food that people eat. Same can be said about tesla stock or apple stock, all producing things of value that make people’s lives easier.

We can’t say same of crypto currencies, its value, like any other currency is artificial. It only has value because we agree it does, and its price is set by market economics regulated by no one, making it prone to manipulation or influence. To play and win in this game of speculation, you must have disposable income, which a lot of Nigerians don’t have, with 57% of the money in the average Nigerian household being spent on food.

CRYPTO, A BREATH OF FRESH AIR

Cryptocurrencies and the technology they’re built on, the blockchain, are however here to stay. Decades of inaccessible financial institutions, bureaucratic government red tapes that stifle trade, unreliable monetary policies and dollar scarcity means that a decentralized monetary system is a breath of fresh air. Beyond that, a school of thought have seen these digital assets as a store of value, in a world were inflation is rife. The argument is that adoption grows the value would increase, the dollar cost averaging of repeated buying at
selected intervals would far compensate for any losses due to momentary volatility. While this is a good use case for crypto, it’s far from the best. For Africa, crypto shouldn’t be an investment or just a store of value. It should be currency.

To understand the implication of what a decentralized financial system can do for Africa (and Nigeria) when its use case is primarily as a transaction currency, we have to do a brief recap of how African trade is currently transacted and what an unregulated digital currency would do, especially in the light of the recently signed AfCTA.

Africa as a region is still very much fragmented, unlike other regional blocs in Europe, Asia or the Americas. The reason for this isn’t far-fetched, the Berlin conference of 1883 that created much of what we now call the nation states in Africa created territories solely for the exploitation of resources. What they left behind is a bunch of fragmented nation states with weak institutions and colonial structures, integrating this to form a regional bloc is what the AU and its predecessor, the OAU has been trying and hardly succeeding at since 1963.

As a result, trade within Africa is marred with a lot of bureaucratic red tapes, even air travel within Africa is expensive. The AfCTA promises to change that, but intra African money transfer, the key thing needed to foster this change, has been a headache. Startups like Chippa Cash have raised significant amounts of money to solve this but the idea of an Africa where money can move seamlessly from end to end is still far off. That is what a crypto can do.

THE MISSED OPPORTUNITY?

The potential for using cryptocurrency as an enabler of trade are limitless, it can simplify a lot of consumer headaches from remittance to settling bills for import and export, which is particularly impacted by dollar scarcity in Nigeria. Very few companies are building products around the idea that crypto is a means to an end and not the end itself. This is particularly a missed big opportunity, one of the very few products in that space, sendcash Africa, generated over $1m in transaction volume in the first three months.

Cryptocurrency as a facilitator of trade is a long-term play at sustainable wealth creation, for Nigerians and Africa. How should we encourage this? By creating products that use crypto as means to solving significant user headaches, from intra African money transfer to loans and credit cards.

This article wasn’t written to change the norm. For a vast majority of Nigerians into crypto, it would always be an investment. A way to make money. This article would do little to change that. But there’s more to crypto than buying, selling and hodling. If one more person can see that, then I think this article has achieved its purpose.