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AAX Trends

The Crypto Adoption Race Between Nigeria And Kenya

The Crypto Adoption Race Between Nigeria And Kenya

Explainers

28 Oct 2022

Both Kenya and Nigeria are evolving differently within the crypto space, with unique development plans. They have been an example for many in Africa.

Africa has once again stolen the limelight in the crypto space with its unstoppable crypto adoption rates. Among all countries, Nigeria and Kenya are leading the way for many to follow. According to Chainalysis's recent report, Nigeria regained its top position among African countries as the country with the most cryptocurrency adoption. Last year, Kenya was considered the first African country in terms of crypto adoption. It begs the question, how did both nations become the leading African countries within the crypto space?

Popular Use Cases Of Cryptocurrency

Nigeria and Kenya share similarities in what drives their citizens to embrace cryptocurrency.

Money Remittance

Like many other developing nations, Nigeria and Kenya are home to millions of underbanked citizens. The lack of basic banking services has driven many to adopt cryptocurrency. Also, opening an account within a crypto exchange is much simpler than qualifying for a bank account.

Citizens residing in both nations view cryptocurrency as an attractive and affordable means to access financial services. Cryptocurrency also allows users to send funds faster and cheaper than the traditional method. During the start of the pandemic in 2020, traditional currency exchanges in Nigeria and Kenya charged consumers high rates to transfer funds globally. This subsequently encouraged many to opt for cryptocurrency to carry out their financial activities.

Saving And Hedging Funds with Cryptocurrency

Both Kenya and Nigeria suffer from hyperinflationary national currencies. Over the past years, both the Naira and the Kenyan Shilling have dropped significantly in value. These currencies are continuously depreciating, which makes it difficult for citizens residing in both nations to meet their basic financial needs, especially for saving.

Bitcoin and stablecoins are the most popular cryptocurrencies in both regions. They are considered to be less volatile compared to both Kenya's and Nigeria’s national currencies. Nigerians and Kenyans mostly use Bitcoin and stablecoins for investment and saving purposes.

Why Is Peer-to-Peer Payment Method So Popular?

Both Nigeria and Kenya have a record-breaking volume of peer-to-peer transactions. This is because of the existing barriers placed by their respective central banks to discourage customers from sending money directly to cryptocurrency exchanges through their bank accounts. The Central Bank of Kenya (CBK) has notified all Kenyan banks to avoid engaging in any cryptocurrency activities or assisting in any transaction with these exchanges.

Similarly, the Central Bank of Nigeria (CBN) has banned all Nigerian banks and financial institutions from serving cryptocurrency exchanges. As a result, this has caused many citizens to use peer-to-peer platforms to access the services provided by crypto exchanges.

Convexity is a blockchain-focused solution and consultancy company based in Nigeria. The CEO and founder of Convexity, Adedeji Owonibi, emphasized how Nigeria’s cryptocurrency economy has shifted since the ban. He also mentioned that a lot of peer-to-peer activity is being carried out in informal group chats on messaging platforms like WhatsApp and Telegram.

Scaling Nigeria And Kenya’s Crypto Performance in 2022

Despite the unstable legislation both regions have regarding the crypto space, it did not stop or halt cryptocurrency adoption.

The Crypto Adoption Race Between Nigeria And Kenya

Nigeria is ranked as the first country in Africa in terms of crypto adoption. According to the Chainalysis report, Nigeria occupies the 11th spot with an overall adoption score of 0.521 whereas Kenya is ranked 19th with an adoption score of 0.397. The report also shows that Nigeria ranks 18th in centralized service value received rankings, while Kenya ranks 43rd.

However, Kenya has outperformed Nigeria in peer-to-peer transactions and decentralized finance (Defi) value received rankings, ranking at 5th and 9th, while Nigeria stood at 17th for peer-to-peer transactions and 20th for Defi value received. In that sense, Kenya is the leading African country for peer-to-peer transactions. It is evident that both regions are strong in different sectors of the crypto market and are exceeding within those categories. But in terms of overall adoption, Nigeria has demonstrated exceptional growth.

Explaining Nigeria’s Growing Interest in Crypto

Early this year, Nigeria has marked about 33.4 million crypto users. The number of users has grown tremendously over the past few years. Nigeria’s growing interest in the crypto space is remarkable.

CoinGecko conducted a report on Google Trends data of search terms since the market crash in April 2022. According to that report, it revealed that Nigeria is possibly the most crypto-obsessed country in the world. Nigeria is ranked as the highest country with a total score of 371. In contrast, Kenya falls to the 15th spot. Some of the keywords searched by Nigerian users were ‘invest in crypto,’ ‘buy crypto,’ and much more.

The Crypto Adoption Race Between Nigeria and Keny

It is evident that Nigerians are heavily invested in crypto and are constantly active within the crypto market.

What are Nigeria’s Upcoming Crypto Plans?

Nigeria is actively looking for ways to progress in the crypto market, with regulations and investors’ safety in mind. As for now, Nigeria is planning to create a virtual free zone with the help of crypto exchanges. The virtual free zone will mainly focus on blockchain and the digital economy. This initiative follows the recent launch of Nigeria’s Central Bank Digital Currency (CBDC), the eNaira, the first-ever CBDC that was introduced to the world.

Will Kenya Catch up?

According to the research done by the United Nations Conference on Trade and Development (UNCTAD), the report found that about 4.25 million Kenyans owned digital assets. The number of users is expected to grow significantly in the years to come.

Currently, The Central Bank of Kenya (CBK) is exploring the use of CBDC. The bank has recently issued a discussion paper to review the application of CBDC. The discussion paper will allow the bank to gain feedback from the community. However, it is still uncertain whether the bank will proceed with adopting CBDCs as they are keen to believe that CBDCs are not effective for the nation at the moment. This is because the bank questions how citizens who are excluded financially can enjoy the benefits of a CBDC. The bank is more willing to adopt CBDC if it could potentially solve problems directly.

The Central Bank of Kenya (CBK) has decided to adopt Bitcoin as its reserve currency. The decision was in response to the current financial crisis in the nation. The governor of the Central Bank of Kenya (CBK), Patrick Njoroge, believes that Bitcoin could solve some of the monetary issues of Kenyans, but he has yet to fully agree to issuing Bitcoin as a reserve currency.

Final Take on Crypto in Africa

Both Kenya and Nigeria are evolving differently within the crypto space, with unique development plans. They have been an example for many in Africa. According to Chainalysis, Nigerians have been a positive influence on Ghana in terms of cryptocurrency adoption. A popular peer-to-peer platform, Paxful, has seen growing numbers in trade volume from Ghana over the past year. The CEO of Paxful, Ray Youssef, explained how Ghana could become one of the African countries that would soon catch up in adoption rates to Nigeria and Kenya. Youssef also mentioned that Nigerians are actively educating locals on Bitcoin and its benefits.

To conclude, despite their differences, both regions have found comfort and have benefitted from the use of cryptocurrency. Cryptocurrency has offered financial alternatives to citizens residing within these nations. There’s undoubtedly more in store for Kenya and Nigeria in terms of digital assets as cryptocurrencies like Bitcoin continue to be incorporated into everyday life to improve conditions.

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Kiran Shehzadi

Content Writer

Kiran is the content writer at AAX. She is passionate about driving cryptocurrency and blockchain adoption through her writing. Aside from curating content, Kiran loves playing sports and watching movies in her free time.

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