Bitcoin Legal Status in Nigeria

Small businesses in African countries have found practical use for bitcoin and thereby provoked a “quiet bitcoin boom” on the continent, writes Reuters. Entrepreneurs use cryptocurrency to settle with suppliers in other countries.

The journalists interviewed 20 bitcoin users and five crypto brokers. Abolaji Odunjo sells phones and accessories in Lagos, a major city in Nigeria, and purchases goods from suppliers in China and the UAE.

With partners from China, the entrepreneur pays in bitcoins: he makes two or three transfers per month, 0.5-0.7 bitcoins each. That’s roughly $5900 to $ 8300 and  the BTC to Naira equivalent is 2.427.437 to 3.414.203 NGN.

According to Odunyo, settlements in cryptocurrency turned out to be more profitable for him: earlier he had to buy dollars to pay for the goods, but the transactions cost the entrepreneur more and more. Nigeria’s economy is dependent on oil, so the decline in world oil prices has led to the fall of the Nigerian national currency, Naira.

Nigeria joins the CBDC club

The manual, which is called e-Naira, says it will have interest-free status. Transaction limits will also be set based on the total cost. The asset will of course serve as legal tender. CBDC is likely to be implemented by the end of 2021, the Central Bank said in June.

The CBDC program itself will consist of five phases. The first concerns the monetary authority package, which is essentially the central bank managing the main components of the product. This includes the issuance, distribution, redemption and destruction of currency.

Nigeria is one of the most technologically savvy countries on the African continent. Cryptocurrencies are extremely popular in the country and their activity easily overshadows that of other African countries.

The government has noted the rise in popularity of cryptocurrency, and there are some signs that regulation will be relatively acceptable. These remarks follow the ban on cryptocurrency by Nigeria’s central bank.

The Nigerian naira has devalued twice this year. It is becoming increasingly difficult for local companies to buy dollars, which are needed for settlements with international partners. Therefore, the business is switching to bitcoin.

Crypto transfers among small businesses and individuals in Africa have grown 55% over the past year since July 2019; according to research firm Chainalysis, reaching $ 316 million in June 2020. Analysts counted transfers in the amount of less than $ 10 thousand, their number has already exceeded 600 thousand per month.

In Nigeria, the volume of small crypto transfers in June reached $ 55 million, and the number of transactions increased by more than 55%, to 120 thousand.

In addition to entrepreneurs, cryptocurrencies are used by migrants who have left to work in other countries. It is also more profitable for them to transfer money to their relatives in bitcoins. For example, if you send 100 pounds from London to Lagos through a transfer service, she will take a commission of about 5%. For the same transfer in bitcoins, the fee will be 2-2.5%.

Despite the growing popularity of bitcoin as a way to transfer money, Reuters reminds that cryptocurrencies still pose risks. Their prices are unstable, and after the transfer, bitcoins again need to be exchanged for currency, even when bought using a P2P crypto exchange, since they can hardly be paid anywhere yet.

In many countries, including African ones, cryptocurrencies do not have a clear legal status, so you can buy and sell them only through brokers that do not work with official exchanges. Because of this, a person cannot count on government assistance if scammers deceive him, Reuters notes.

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