Cryptocurrency investors have been active in Nigeria since around 2015. For the most part, however, crypto was associated with “Ponzi-schemes” and “internet fraud.” Also, until recently, the government has held a rather cautious stance towards cryptocurrency activities in the country.
However, despite this lack of initial support by the government, a false narrative about cryptocurrencies, and a deep economic recession, the Naira (NGN) is the 17th highest traded fiat pair with Bitcoin, globally, and the second-highest in Africa.
While there are many narratives to this rather defiant and thriving sub-Saharan crypto market, we will be looking at certain crucial socio-economic activities and situations that are greatly affecting Bitcoin and altcoin investing in Nigeria. Then finally, we will look at possible ways to buy Bitcoin in Nigeria and trade.
The Nigerian 2016 Recession and the rise of Crypto Investing
The Nigerian 2014 to 2016 economic recession, saw an estimated 17% inflation rise, the highest it had been in 13 years.
Some cryptocurrency enthusiasts in Nigeria, have now taken to the practice of hedging some of their savings, as well as their investment portfolios in cryptocurrencies, following the lessons learnt from that recession.
High Labour Market Supply
Also, the last economic recession in Nigeria coupled with an overpopulation problem has left a huge percentage of its working population, who are predominantly millennials, without jobs. This is the major reason why many Nigerians are seen exploring unconventional financial opportunities beyond the Nigerian economic shores, such as migration, and cryptocurrency trading.
While there have been many reported cases of Ponzi related and fraudulent Bitcoin investment schemes, a large number nonetheless are active legitimate participants in the blockchain and cryptocurrency scene.
High Import Rates and the Bitcoin alternative
One of the biggest problems Nigerian importers face, is a high fiat currency exchange rate. With most of its imports coming from China, and considering the high volume of cryptocurrency transactions in China, it is becoming clear that Bitcoin is becoming increasingly important as a medium of exchange.
Some Nigerian importers are now beginning to bypass the conventional financial corridors they used in the past, and adopt cryptocurrencies like Bitcoin, to meet their FOREX needs.
According to a 2018, world bank report, the cost of sending at least $200 across international borders is 7.1% on average. Even more, this average figure is reported to be about 9.4% in sub-Saharan Africa. Some Nigerians have resorted to using Bitcoin to send money to their families since it’s faster, cheaper, and uncensored.
Crypto Regulation in Nigeria
Fortunately, the Nigerian government is now making efforts to properly integrate cryptocurrencies into its socio-economic sphere. Recently a committee set up by Nigeria Security and Exchange Commission (SEC) released a roadmap report that would form what crypto laws will look like in the country. This covered issues like the classification of cryptocurrencies as assets, not currencies; a regulatory framework for cryptocurrencies; and many other mechanisms to properly integrate the industry into the economy.
Now, cryptocurrency service providers and investors positive about the future of cryptocurrency and the blockchain industry in the country.
How to buy crypto in Nigeria
Finally, let’s take a look at the different ways of getting into crypto and trading in Nigeria.
Peer-to-peer: Peer-to-peer (P2P) simply constitutes a direct exchange between two counterparties. In Nigeria a lot of crypto is sold by unregistered merchants on WhatsApp and Telegram groups, as well as on crypto P2P service platforms. However, there have been several reports of fraud in this space, which is why it isn’t recommended.
Over-the-counter (OTC) platforms: Very few exchanges in Nigeria offer OTC services, but an OTC is a safe way of buying and selling crypto for fiat in a peer-to-peer fashion but then with a third-party safety mechanism.
OTCs usually work with some type of escrow system, which is a method where the traded assets are locked up in an automated waiting-wallet, controlled at the exchange’s end which releases the funds only after the seller has confirmed receipt of the agreed payment.
Buying Bitcoin with a Debit card: Buying Bitcoin with a debit card is not very common in the Nigerian crypto space and it also comes at a high cost.
Trading on an Exchange
Finally, once you have some Bitcoin in your wallet, you can either hold on to it for the long term or intelligently take advantage of the price movements and make profits on the futures market either by going long or short. At the moment, centralized exchanges are the best option for this type of activity.
How to choose an Exchange?
Finding a trusted exchange is the first intelligent step to trading. Usually, a trusted exchange will require new users to verify their identity, to make sure market participants are not sanctioned, and to monitor capital flows.
Also, security is another crucial element when choosing an exchange; and finally, another important element is a high performing order book for traders to get a more competitive price.
It’s also important to see how deep the order book is. If you’re trading small amounts, the order book does not need to be particularly deep, but if you intend to trade large volumes, sometimes you’re better off trading on an OTC platform, unless the exchange is capable of handling large volumes at a fast pace.
Presently, AAX is the only cryptocurrency exchange that uses the same matching engine as the London Stock exchange, as well as other top-tier, high volume stock exchanges. It is capable of handling institutional order volumes with ultra-low latency.
AAX offers a Spot market, where you can trade across more than 70 trading pairs; a Futures Market where you can trade perpetual contracts for Bitcoin, Ethereum, Litecoin, XRP, and EOS, with high leverage, and an OTC marketplace where you can buy and sell crypto for fiat.
Consider opening an account on AAX and you can immediately trade cryptocurrency and withdraw up to 1 BTC per day. If you complete your identity registration, we will give you up to $60 USD worth of Bitcoin and you will gain full access to our OTC marketplace, where you can buy and sell crypto for fiat.