International Journal of Advances in Computer Science and Cloud Computing, ISSN(p): 2321 –4058, ISSN(e): 2321 –4392

Volume-10, Issue- 2, Nov.-2022, http://iraj.in

BLOCKCHAIN AND CRYPTOASSETS IN THE NIGERIAN
ECOSYSTEM
OLUSEGUN FELIX AYADI

Texas Southern University, Houston, Texas, USA

E-mail: olusegun.ayadi@tsu.edu

Abstract - This short paper examines the confliction atmosphere within which Nigerians trade cryptocurrencies. Nigerians
are quite adamant to trade cryptos even in the face of regulatory obstacle in the form of a ban. Most traders of cryptos in
Nigeria are young people who rely on social media to get investment advice. As for the government entities, there seems to
be a conflict. The Central Bank of Nigeria frowns on crypto trading, the Securities Exchange Commission prefers regulation
of cryptos and the Nigerian Stock Exchange prefers to adopt blockchain technology in its operations beginning in 2023.

Keywords - Nigeria, Blockchain, Cryptocurrency, Peer-to-peer platform, eNaira, Cryptoassets.

I. INTRODUCTION traditional finance processes while increasing

Blockchain is considered one of the most
significant advances in record keeping since double-
entry bookkeeping emerged in Italy in the 15th
century. There may be differing opinions on the rate
of adoption, but the view is widespread that
blockchain has the potential to dramatically change
the business landscape. The creation of bitcoin in
2009 is credited to some hacker(s) known as Satoshi
Nakamoto. Trautman and Molesky (2018) note that
bitcoin is the reference point when blockchain is
subject of discussion. Wright and De Filippi (2017)
view blockchain as “a distributed, shared, encrypted-
database that serves as an irreversible and
incorruptible public repository of information. It
enables, for the first time, unrelated people to reach
consensus on the occurrence of a particular
transaction or even without the need for a controlling
authority.”
Blockchain is currently used extensively to
enhance the basic services that are essential in trade
finance. It can record alltransactions back to the
originating point, allowing financial institutions to
review all transaction steps and reduce the risk of
fraud. Blockchain technology greatly simplifies the
direct transfer of trade assets and increases
confidence at its original issuance by providing
unique, non-forgeable identities for assets, along with
an inviolable record of their ownership. The result is
an opportunity for additional financing services that
are based on the trade of physical goods. Besides
public blockchain such as the one used in trade
finance, companies can also use private blockchain
where permission to write, send and receive data is
controlled by one organization. An example of this is
a blockchain deployed by a corporation to collaborate
with other divisions or amongst a few authorized
participants.
Another evolving use of blockchain is in creating
„Smart Contracts.‟ It initiates a self-executing policy
that is triggered by a previously agreed upon events.
The smart contracts can eliminate delays in
transparency and reducing reliance on the third-party
to follow through on the commitments. Moreover,
like other parts of a blockchain, smart contracts are
indisputable, so they can enhance accuracy in the
financial statements. The ability to innovate „Smart
Contracts‟ is most suited to help financial institutions
by lowering costs and improve efficiency and
eliminates the need for information clearinghouses. It
can further minimize the time that capital is tied up
for a transaction and initiate an automatic transfer
with minimized transaction fees once the agreed set
of conditions are met.
According to Soutter et al. (2019), new
Financial Technology (Fintech) businesses and other
solutions are growing in number in sub-Saharan
Africa. Given that Fintech is a recent development
that will reshape the financial landscape of the future,
it becomes appropriate to incorporate it into tertiary
institutions‟ curriculum. In a broad sense, Fintech
captures any innovation covering how people transact
business including, the invention of digital money,
double-entry bookkeeping, raising funds for startups,
managing investments and money transfers.
According to Kagan (2019), fintech seeks to improve
and automate the delivery as well as the use of
financial services. According to Ibrahim (2018),
distributed ledger technology (DLT) has benefits to
transform and revolutionize the traditional payment,
settlement and clearing of financial transactions. This
has significant implications for record keeping,
storage and transfer of digital assets.The use of
blockchain results in transaction cost reduction, speed
up end-to-end settlement, ease audit process and
makes for overall system resilience.Ibrahim (2018),
notes that distributed ledger technology (DLT) has
benefits to transform and revolutionize the traditional
payment, settlement, and clearing of financial
transactions. This has significant implications for
record keeping, storage, and transfer of digital assets.
The purpose of this paper is to provide an overview
of the ecosystem of blockchain technologies in
Nigeria and also give an assessment of the

Blockchain and Cryptoassets in the Nigerian Ecosystem

9
 International Journal of Advances in Computer Science and Cloud Computing, ISSN(p): 2321 –4058, ISSN(e): 2321 –4392
Volume-10, Issue- 2, Nov.-2022, http://iraj.in
participants in transactions involving
cryptocurrencies. The overview will include the
evolution of cryptocurrencies, government reaction to
trade in cryptocurrencies, migration of traders to
peer-to-peer platforms and the profitability of
cryptocurrency trade in Nigeria.
II. BLOCKCHAIN TECHNOLOGIES AFRICA
Researchers, including Avan-Nomayo (2019),
Kone (2020),Mavilla and Pisani (2020) and Ndemo
(2022), are predicting a significant role for
blockchain technologies in Africa. The promising
areas identified by the researchers include:
(1) Digital payment infrastructures, including central
bank digital currencies
(2) Peer-to-peer energy trading
(3) Trade facilitation
(4) Digital registration of land ownership
(5) Public budgeting
(6) Supply chain of agricultural products
(7) Accelerate financial inclusion
(8) Governance and control of corruption
Ouedraogo and Sy (2020) study the relationship
between digitalization and corruption perception in
Africa. They also examine the relationship between
digitalization and trust in tax officials. Their results
reveal that adoption of digital tolls in Africa is
associated with a lower perception of corruption and
a higher trust in tax officials. These results are robust
to the different proxies of digitalization. The authors
also conclude that the potential dampening effect of
digitalization on corruption perception is credited to
trust of tax officials. Moreover, an increase in
internet usage is negatively correlated with corruption
perception but internet shutdowns through
interference by government undermine the trust of
citizens. Finally, the authors proffer a blockchain
technology solution to promote transparency and
reduce corruption.
According to Oxford Analytica (2018), Sub-
Saharan Africa is projected to experience a growth in
cryptocurrency transactions. South Africa is leading
the way by installing its first crypto ATM in May
2018. In 2017, the volume of peer-to-peer exchange
on LocalBitcoins platform reached 30 million with a
value of $2.3 million. However, Nigeria has not been
left behind with a value of $6.6 million by December
2017. The interest in crypto in the region is due to
opportunities in alternative finance and remittances
industries. Allied to this is the fact that technology
and innovation are taking a foothold in the region.
This sentiment is shared by the Economist
Intelligence Unit (The Economist) who argues that
blockchain-based cryptocurrencies do not depend on
stable governments and balanced budgets in order to
guarantee monetary value. Cryptocurrencies can help
insulate an ecosystem from inflationary crisis. The
organization concludes that blockchain technologies
Blockchain and Cryptoassets in the Nigerian Ecosystem
10
has potential to improve operating environment in
respect of addressing corruption, information about
land and property rights as well as addressing
bureaucracy and opacity.
Masie (2020) argues that cryptoassets have a
potential positive contribution to financial innovation,
in terms of payments efficiency and investment
diversification. They are a hedge against political
risk. The author reports that Twitter‟s CEO, Jack
Dorsey, plans to move some operations to the African
continent to explore the opportunities that exist there.
Moreover, OmiseGo is also reported to have
airdropped $650 worth of crypto tokens in March
2018 to refugee families in Uganda. The South
African Reserve Bank is running Project Khokha to
explore the use of blockchain technology in interbank
settlements. Anand (2019) reports that the African
market is seen as hotbed for developments in the
digital ecosystem. Electroneum, a major participant in
the cryptocurrency market is launching top-up
services in three countries using ETN token. The
CEO of Electroneum notes that of the 100,000 Know
Your Client (KYC) users in Africa, more than 30,000
are from Nigeria. With the top-up service, mobile
service users are able to recharge their accounts.
Therefore, it is no exaggeration to claim that
blockchain technologies are making big waves in
Africa.
III. BLOCKCHAIN TECHNOLOGY IN
NIGERIA
The Nigerian government was initially well
disposed to allow blockchain technology to thrive. In
an attempt to provide a conducive environment, a
research advisory committee was established in 2017
to provide frameworks, guidelines, standards and
regulations for the adoption of blockchain
technologies. The research body is headed by
Director General of the Nigerian National
Information Technology Development Agency
(NITDA). In 2018, The Nigerian Securities and
Exchange Commission also set up a Fintech
Roadmap Working Group (FRWG). According to
Famuyiwa (2019) the responsibility of the FRWG is
to work on a blockchain and virtual financial assets
ecosystem that is relevant to the Nigerian capital
market. Gomes (2020) reports that Blockstale BTM
installed the first Nigerian bitcoin ATM in Lagos
with a promise to install thirty more terminals across
the country.Kirimi (2020) writes that Nigeria has
overtaken Ghana and South Africa in terms of interest
shown in cryptos. The weekly trading volume on
LocalBitcoins platform reached $1.65 million.
Exchange firms are accelerating crypto adoption. For
example, Nairex crypto exchange (in Abeokuta) was
the largest crypto exchange in Nigeria. Many
businesses in Nigeria accept crypto as payment
method. A popular mobile airtime, GSM2ME,
accepts payments in bitcoin.
 International Journal of Advances in Computer Science and Cloud Computing, ISSN(p): 2321 –4058, ISSN(e): 2321 –4392
Volume-10, Issue- 2, Nov.-2022, http://iraj.in
Using the gateway, Flutterwave, the Malta-
based crypto exchange, Binance, opened fiat deposits
for Nigerians. This makes it possible for Nigerians to
use naira (NGN) to purchase bitcoin, stablecoin and
binance coin. Invoice (2020) foresees a bright future
for cryptos even when the Central Bank of Nigeria
warns that cryptos are not legal tender in Nigeria. In
2017, LocaBitcoins (Nigeria) was second in the
world‟s peer-to-peer bitcoin transactions. The
expected bright future of blockchain technology in
Nigeria is premised on its ability to accelerate
business growth through cross-border payments,
improved digital security, supply chain tracking,
digital marketing and smart contracts. The current
process of cross-border payments is slow, costly,
error-prone and open to money laundering. The
adoption of cryptocurrencies in Nigeria, serves to
address these deficiencies.
According to Invoice (2020), hackers are out
to invade and steal consumer identity. The adoption
of blockchain technology can bring about a seamless
authentication of transactions and consequently
reduce fraud. Moreover, the tracking of products
across the global supply chain can be efficiently done
with blockchain technology. In terms of digital
marketing effectiveness, blockchain technology can
be efficiently employed. The author concludes that
smart contracts help participants to a transaction to
monitor the contract stipulations in real time and that
this will be immensely advantageous to Nigeria with
adoption of blockchain technologies.Oludimu (2018)
identifies five key areas where blockchain
technologies can benefit the Nigerian economy.
These include, budget tracking in a corrupt
environment, financial inclusion, access to credit
facilities, unified database system and free and fair
elections.
IV. CRYPTO OBSESSION IN NIGERIA
According to Google Trends, Nigeria tops
the google searches for bitcoin in the world. This is
evidence of a rising trend to learn about bitcoin and
other cryptos. Since Satoshi Nakamoto‟s launching of
Bitcoin in 2008, the market has been flooded with
several clones that are collectively called altcoins or
shitcoins. By January 2022, there are over 8,000
cryptocurrencies in existence.
In Nigeria, the initial reaction to crypto was
not encouraging. However, the wave of protests,
especially #ENDSARS in October 2020 led Nigerian
authorities to clamp down on the bank accounts of
key protesters and their sponsors. Many Nigerians
turned to cryptos to get around the effect of
government action. At this point, cryptos have
become investments and speculative instruments.
Traders are involved in several risky activities
leading a rational person to conclude that most traders
do not understand what they are betting their money
on. Nyambura (2022) reports that a survey by
Blockchain and Cryptoassets in the Nigerian Ecosystem
11
CoinGecko examines Google Trends data for some
crypto search terms and finds that Nigeria recorded
the highest score among a pack of countries. Iyatse
(2022) and Smith (2022) report that Nigeria occupies
a top position on the Crypto Adoption Index. This
situation became a huge concern for the regulatory
authorities in Nigeria. To stem the growth of crypto
in Nigeria, the Central Bank of Nigeria ordered
commercial banks in 2021 to desist from involvement
in crypto transactions. The central bank argues that
crypto poses investment risk, it can be used to effect
money laundry and the financing of terrorism. Since
2021, the Nigerian central bank has imposed heavy
fines on three banks who flouted its directive on
crypto transactions. The move by the central bank has
driven participants in crypto transactions to migrate
to peer-to-peer platforms.
In October 2021, the Central Bank of
Nigeria launched its digital currency, eNaira. With
eNaira, a subscriber will have access to an electronic
wallet that allows one to store, send and receive
electronic funds. The arguments for this move include
the possibility of easing diaspora remittances and
cross-border payments. Other reasons include an
uptick in financial inclusion and lower payment
processing costs. There are drawbacks to central bank
digital currencies (CBDC). According to Kone
(2020), CBDC can lead to excessive
disintermediation of the financial sector because
people can see the central bank as a substitute to a
commercial bank. Commercial banks can lose a
significant market share with a consequent threat to
the banking system. Another critical issue revolves
around data protection. Cash is the only known
anonymous payment method. Therefore, issuing
CBDC required adequate provision for subscriber
privacy.
Iyatse (2022) notes that the novel
cryptocurrency blurs the thin line among gambling,
speculation and investment. This line of thought is
repeated by Nyambura (2022) who notes that
Nigerian investors have an obsession about crypto
because of the volume of transactions in crypto even
when prices are heading south.Obiezu (2022) gives
some justifications for the obsession of Nigerians
with crypto. According to the author, Nigerians rely
on crypto to hedge against the decline in the value of
the local currency. The argument is that the Nigerian
government policies especially on trade balance is
responsible for the depreciation of the local currency.
Obiezu (2022) reports that stablecoins and bitcoin
trading volume has been rising on a particular peer-
to-peer platform with more than 250 percent increase
in the last week of July 2022.Iyatse (2022) reports the
results of a survey by a local newspaper which
indicates that Nigerians rarely know what they are
betting their money on. Most investors are influenced
by unrealistic fantasies and pressure from peers on
social media. Some investors go a little further into
 International Journal of Advances in Computer Science and Cloud Computing, ISSN(p): 2321 –4058, ISSN(e): 2321 –4392
Volume-10, Issue- 2, Nov.-2022, http://iraj.in
crypto futures using leverage. Little wonder that
several investors are losing money in crypto but
continue to trade anyway.
V. CONCLUSION
The crypto ecosystem in Nigeria is quite
complicated. It is shown in this piece that most
investors are young and uninformed about investing
education. As for regulators, they seem to be sending
mixed signals with no coherence in regulation.
Nigerian investors in crypto still require some level of
financial literacy. The efforts of some exchanges such
as Binance and Paxful to educate investors is
commendable and the Nigerian government agencies
should have to speak with one voice in order to reap
the benefits of crypto and blockchain.
REFERENCE
[1] Anand, “Electroneum makes African focus clear as company
launches top-up services in Nigeria, Uganda, Tanzania”, TWJ
News, November 7, 2019.
[2] D. Famuyiwa, “SEC to include blockchain, virtual financial
assets in capital market”, Nairametrics, September 11, 2019.
[3] I.A. Ibrahim, “Blockchain in Nigeria”,ITNOW, vol. 60, no. 4,
pp.18-19, 2018.
[4] Invoice, “Blockchain technology in Nigeria: How it drives
business growth”, available at invoice.ng/blog/blockchain-
technology-in-Nigeria/, 2020. [Accessed 17 May 2021].
[5] G. Iyatse, “Young Nigerians defy CBN ban, gamble on risky
crypto assets”, The Guardian, February 17, 2022.

Blockchain and Cryptoassets in the Nigerian Ecosystem
12
[6] Kirimi, “Nigeria bullish about bitcoin and cryptocurrencies”,
TWJ News, February 19, 2020.
[7] L. Kone,Blockchain in Africa: Opportunities and challenges
for the next decade. Smart Africa, Kigali, Rwanda, 2020.
[8] D. Masie, “Crypto in Africa: A coming money revolution?”,
African Banker, March 1, 2020.
[9] R. Mavilla, and R. Pisani, “Blockchain and catching-up in
developing countries: The case of financial inclusion in
Africa”, African Journal of Science, Technology, Innovation
& Development, vol. 12, no. 2, pp. 151-163, 2020.
[10] Ndemo,“The role of cryptocurrencies in sub-Saharan Africa”,
Brookings Institution, Available at
https://www.brookings.edu/blog/africa-in-
focus/2022/03/16/the-role-of-cryptocurrencies-in-sub-
saharan-africa/, March 16, 2022 [Accessed 7 Sept 2022].
[11] H. Nyambura, “The most curious nation about crypto is
Nigeria, study shows”, Bloomberg, available at
www.bloomberg.com/news/articles/2022-08-10, August 10,
2022. [Accessed 7 Sept 2022].
[12] T. Obiezu,“Nigerians turn to crypto assets as currency
weakens”, available at voanews.com/a/nigerians-turn-to-
crypto-assets-as-currency-weakens-/6682437.html, August 1,
2022. [Accessed 6 Sept 2022].
[13] T. Oludimu, “Five areas the Nigerian economy can benefit
from blockchain technology”, available at
techpoint.africa/2018/03/19/blockchain-nigerian-economy/,
March 19, 2018. [Accessed 3 June 2021].
[14] R. Ouedraogo, and M. A. N. Sy. “Can digitalization help
deter corruption in Africa?” IMF Working Paper No. 68.
2020.
[15] Perez, “Nigeria‟s conflicting relationship with
cryptocurrency”, Identity Review, June 9, 2022.
[16] M. Smith,“Cryptocurrency usage soars in Nigeria despite
ban”, S&P Global Market Intelligence, June 9, 2022.
[17] L. Soutter, K. Ferguson, and M. Neubert, “Digital payments:
Impact factors and mass adoption in Sub-Saharan
Africa”,Technology Innovation Management Review, vol. 9,
no. 7, pp. 41-55, 2019.