Why Nigeria and South Africa are winning the cryptocurrencies adoption race in Africa

Cryptocurrencies hold the potential to revolutionise the entire global financial system. Crypto assets and blockchain technology is being taken seriously across the world as their real-world potential is being realized.

While crypto adoption is booming across the globe, both Nigeria and South Africa are forging a different path.

South Africa and Nigeria are the largest economies in Africa, and both countries are seeing mass adoption of cryptocurrency trading, with financial and capital markets regulators expecting unprecedented growth in the crypto market.

While this does not come without risks involved with volatile market conditions, scams and schemes, more people in Nigeria and South Africa are discovering the benefits of transferring digital currency.

You might also like: Basics of Risk Management

Fertile Ground for Digital Money

One of the main driving factors behind the massive rate of adoption of crypto assets in South African and Nigeria relates to crypto as mobile money.

Cryptocurrency payments are borderless and a fraction of the cost of conventional payments. Africans understand cryptocurrencies easily because the unbanked populations do not know about complex banking systems.

South African and Nigeria is in the perfect position to benefit from the crypto boom. These countries have large groups of growing generations that feature adaptable young professionals and entrepreneurs.

Avoiding the instability associated with fiat currency

Local currencies are unreliable, and hyperinflation is a growing concern in South Africa and Nigeria. The South African Rand and the Naira are constantly competing against stronger foreign currencies such as the US dollar, Euro, and the British pound.

This has led more people to start trading cryptocurrencies to try and beat inflation. Digital currency offers a viable alternative to traditional government-managed currencies.

Highest adoption rate globally

The overall African crypto market has already grown over 1,200% in the past year according to trading volumes and overall value. Between July 2020 and June 2021 African countries collectively received more than $105 billion in crypto.

Three of the largest crypto trends in South African and Nigeria relate to:

• Growth in grassroots adoption is massive in four of the largest economies in Africa namely South Africa, Nigeria, Kenya, and Tanzania. This ranks Africa overall within the Top 20 Global Crypto Adoption Index.
• Increase in the popularity of peer-to-peer (P2P) exchanges – Decentralized Exchanges (DEX) platforms are becoming increasingly popular, especially in Nigeria and Kenya where central banks prohibited regulated financial institutions from dealing with cryptocurrency exchanges, resulting in a move to P2P exchanges.
• Crypto to preserve and increase wealth – currency risk is extremely high in different African countries. Central banks are devaluating local currency, leaving people vulnerable to hyperinflation. This has led to an increase in crypto investment as a hedge against inflation.

It can be a win for remittances

Cryptocurrency transactions are truly borderless, resulting in Africans joining the cause to send remittances internationally at very little cost.

The cost of bank transfers is astronomical, often as high as 20% and cryptocurrencies offer cheaper transaction costs at a fraction of this.

By using cryptocurrencies as payment, Africans are avoiding costly bank fees, currency conversion fees, and lengthy processing times on transactions.