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What’s fueling Bitcoin adoption in Nigeria?
Citizens of developing countries cling to Bitcoin in the face of a failing and corrupt economy. By Ayelen Osorio, Bitcoin writer.
Nigeria is one of the world’s fastest-growing bitcoin adopters. In an effort to understand the growing role and need for bitcoin in Nigeria, Trezor hosted a conversation between Abubakar Nur Khalil (Nigerian Bitcoin Core Developer) and Obi Nwosu (CEO and Founder of Fedimint).
In the hour-long conversation, they discussed how economic turbulence in Nigeria is fueling bitcoin adoption in the country, how a community wallet could help solve the bitcoin custody challenges that exist today, and of course, bitcoin’s bright future.
Economic uncertainties in Nigeria
Until now, bitcoin has often been associated with small or struggling economies. So when we consider that Nigeria is Africa’s largest economy, it’s somewhat surprising to learn that many Nigerians are turning to bitcoin. Why is this the case?
For starters, Nigeria’s local currency, the Naira, has depreciated 209% over the last six years, inflation figures stand at 19% and specifically the cost of food and fuel continues to increase. The rising cost of living, in combination with limited access to affordable financial services, has created tension in the lives of ordinary citizens.
“Yeah, there’s definitely a lot of frustration and it’s not only frustration, it’s really a general lack of hope for a lot of people.” — Abubakar Nur Khalil
Aside from the Naira’s failure to hold its value, political repression, corruption and police brutality plague the country, as was evident with the scandals around the Special Anti-Robbery Squad (or SARS for short).
Responsible for fighting robberies, kidnappings and firearms crimes, SARS was instead carrying out extrajudicial killings, disappearance of people, extortion and torture of its own people. Nigerians that participated in or showed support for protests against SARS were soon faced with the harsh punishment of having their bank accounts closed down.
“It was the first time individuals saw that your bank account could get locked up for simply having speech that the state doesn’t want you to have or protesting in general.”
With this background in mind, it’s not surprising that Nigerians have lost faith in their government’s ability to protect their wealth and, quite literally, their lives. It’s also why Nigerians are seeking alternative ways of storing and transferring money, and inevitably turning to bitcoin.
Nigerians are adopting bitcoin
To protect their money in an adversarial environment, Nigerians are buying bitcoin. In fact, it is reported that one third of Nigerians have already invested in bitcoin. When you consider Nigeria’s population to be over 200 million, that number is astounding.
While bitcoin is an escape from currency devaluation, censorship, and violence for millions of Nigerians, bitcoin’s volatility still makes some feel apprehensive. That’s why the more cautious Nigerian prefers to tap into stablecoins before delving into bitcoin.
“For them, the price volatility is something that they simply cannot contend with, especially on a day-to-day basis. So, a lot of them flocked to stablecoins. And we kind of see this as a transitional medium for them to get comfortable with bitcoin and digital currencies in general. A lot of people are using stablecoins or bitcoin and often a combination of both.”
Be it stablecoins or bitcoin, what remains true is that Nigerians are taking economic empowerment into their own hands. Through bitcoin, they can access international markets thanks to its peer-to-peer, borderless, censorship-resistant nature. Meanwhile, Naira holders are bound to a withering market with very little hope of prosperity.
In 2021, the Nigerian government introduced the eNaira, a central bank digital currency (CBDC). Nigerians were not quick nor eager to adopt the eNaira because they understood it was still the same centrally-controlled Naira.
“Nigerians also know that the eNaira is still the same Naira… So for them, it’s a case where they see no additional value of going to this rebranded Naira because it still has all these issues that they’re facing… It’s available on a couple of bank apps, but only a small portion of people actually use it — like folks in the CBN (Central Bank of Nigeria). But everyone else is really still sticking to either dollars or bitcoin.”
The inability of CBDC’s to get widely adopted speaks volumes to the fact that there is a deep distrust of centrally-controlled currencies. Nigerians understand there are hundreds of currencies out there, but there is only one sound, global, decentralized, mathematical currency. And that is bitcoin.
Community custody of bitcoin
Buying bitcoin is great, but it is also important for Nigerians to self-custody (or secure) their bitcoin. The problem is, many Nigerians find the process of self-custody to be too complicated, too technical, and too time and energy consuming.
Wanting to avoid the inconvenience, they’ll keep their bitcoin in the hands of third-parties such as exchanges. They’ll trust that said parties will not fail, or behave with ill-intentions, or be forced by regulatory bodies to take certain actions that could sabotage their economic value (and ultimately their freedom). Nothing could be further from the truth, as we’ve seen the industry continuously plagued by such failures.
To solve the issue of custody, Fedimint is helping people custody their bitcoin as a community, taking advantage of bitcoin’s technology and the human connections we trust. It is a community wallet designed to be used by people who already have high levels of trust in each other (think families, close friends, community groups, small villages, etc.)
“Instead of being your own bank, you can be your own community bank.” — Obi Nwosu
Fedimint recognizes that some people within any community are more bitcoin-savvy, and therefore more suited to safeguard the group’s bitcoin than others. This core collective of people will do the heavy lifting of hosting the wallet, processing transactions, securing keys, and ensuring privacy is protected. Hence, their role as “guardians.” The remainder of the community are known as the users.
“And in that context, [guardians] will run a full node. They will get a private key, public key, but they need to safeguard and they will form a multi-signature wallet, which is the wallet for the community. But each one of those will need to maintain a backup of their own private key. So that could be done with a device like the Trezor or so on. It could be done with maintaining a 24-word seed and storing that.”
Community custody certainly sounds like a practical solution to bitcoin’s custody challenge. It could help alleviate many of the issues and risks of self-custody for the non-technical, non-bitcoin savvy, everyday Nigerian.
With that said, whenever decision-making and private keys lay in the hands of others, we give up something in return. That is self-sovereignty, the one true tenet of bitcoin. However, the way we choose to custody our bitcoin, whether it be through ourselves or our community, should be up to us and us alone.
Finally, when asked “what do you think is needed most in Nigeria for bitcoin adoption to proceed smoothly?” this is what Obi had to say:
“I think we have all the elements we need. We have incredibly resourceful people, incredibly intelligent people and passionate people. And we have technology and tools. And the tools that are missing are all coming in the next six to twelve months. We have technologies and we have one of the first Bitcoin conferences happening in West Africa. We have advances in the Lightning Network, like Taro, that are reaching levels of adoption, and the brain power is there. I’m just waiting to see magic happen over the next twelve to twenty-four months.”
It will be interesting to see how Nigeria continues to lead the charge in bitcoin adoption. More importantly, what it will do for Nigerians’ quality of life, security and freedom. If anything, it’s already showing us that bitcoin can be a humanitarian and an altruistic tool to restore Nigerians’ sovereignty and freedom.
