Bitcoin has seen growing adoption in Nigeria, especially since the economy fell into recession earlier this year following much lower global oil prices. The economy’s contraction by 2.06% between April and June 2016 has increased concerns regarding Nigeria’s banking system, with the nation’s currency greatly devalued, sending bitcoin at an all-time high of $1,228.09 in Nigerian money, according to the lowest offer on local bitcoins.
In this context, Nigeria Today reports that Umaru Ibrahim, managing director and CEO of the Nigeria Deposit Insurance Corporation (NDIC) stated at a workshop organized by NDIC that:
Another phenomenon emerging in the banking and financial landscape is the emergence of what is known as bitcoin. I understand that a lot of people have started to patronize bitcoin.
NDIC, in collaboration with the Central Bank of Nigeria, has increased supervision of the banking system to try and maintain financial stability. Bitcoin, so being outside of any central party’s control, may, at scale, destabilize the wider financial system by devaluing the nation’s currency, relative to bitcoin’s value, which may cause inflation. Ibrahim states:
“On our part we have constituted a committee together with Central Bank to have an in-depth study of this phenomenon, looking at the advantages and disadvantages [of bitcoin], what it means for the payment system, safety and security of customer, money laundering, point of correction, guide or measurement of quantum of money or near money instrument, and the economy.”
For a country like Nigeria, which although the world’s 21st largest economy, lacks much banking infrastructure as we know it in the west and continues to suffer from a high rate of inflation annualized at 8.3%, digital currencies like bitcoin provide the nation with a way to leapfrog from developing to largely developed as far as payment systems are concerned. That is because bitcoin’s global nature, its easy exchange for national currencies, as well as the use of services which provide conversion of bitcoin to fiat on the fly, such as BitPay or BitWage, provides a mechanism by which anyone can be paid anywhere, without needing a bank account.
Although it is still early stages for bitcoin, the currency might now be reaching a tipping point as it moves from the early adoption phase to a globally recognized brand name, carving niches across the globe, primarily as a hedge against continued monetary mismanagement worldwide, but also as a payment system to avoid unnecessary conversion into local currency with its own costs and time delays.
Countries such as Nigeria, Venezuela, China, India, are at the forefront of this global shift, as national currencies are now kept in check by something that, unlike gold, you can easily move around, as well as perform, at scale fairly conveniently, all functions of fiat currencies, and far more on top with smart contracts which turn money into pure, easily programmable, code.
Image from Shutterstock.
Last modified: May 21, 2020 10:10 AM UTC