Nigeria, the biggest financial system in Africa, has been dealing with a extreme scarcity of {dollars}, resulting in a decline in international direct funding (FDI). The Nationwide Bureau of Statistics (NBS) reported that FDI dropped by 33% in 2021, reducing from $698 million within the earlier yr to $468 million. The state of affairs is worrying as FDI has decreased by 90% since its peak in 2008, reaching a brand new low in 2021. The shortage of international funding within the nation has led to a big setback for the expansion of the financial system.
Regardless of the decline in FDI, the adoption of cryptocurrencies in Nigeria has grown exponentially. Many Nigerians want to retailer their cash in digital currencies somewhat than the nationwide foreign money, the naira, attributable to its fixed devaluation. In actual fact, Nigeria ranked eighth on the planet by way of crypto adoption and utilization charge in Chainalysis’ 2020 Cryptocurrency Geography Report. This exponential progress in crypto adoption charge in Nigeria was anticipated to encourage extra international funding within the nation. Nonetheless, the scarcity of {dollars} has discouraged international crypto corporations from investing in Nigeria.
The Central Financial institution of Nigeria (CBN) banned cryptocurrency transactions in February 2021, directing all industrial banks to shut accounts belonging to crypto exchanges and different companies that take care of cryptocurrencies. The ban has additional discouraged international buyers from coming into the market.
Regardless of the challenges, Olumide Adesina, an authorized funding dealer, tweeted that no state in Nigeria has taken the initiative to draw international buyers within the fintech, leisure, and crypto industries, even if Nigerians “love” these sectors. In one other tweet, Adesina highlighted that constructing an actual tech and crypto group like Silicon Valley in Lagos state would create hundreds of direct jobs.
In response, Lagos State Governor, Babajide Sanwo-Olu, introduced proposals for crypto adoption within the state, in line with native media experiences. The initiatives proposed by Sanwo-Olu embody establishing a devoted sandbox regulatory framework for cryptocurrencies, making a crypto-focused innovation hub, and offering incentives for companies that settle for crypto funds. These initiatives are anticipated to encourage international buyers to enter the Nigerian market and to spice up the expansion of the financial system.
In conclusion, Nigeria’s dilemma is that whereas the adoption of cryptocurrencies has grown exponentially, the nation is dealing with a extreme scarcity of international direct funding. The scarcity of {dollars} has discouraged international buyers, together with crypto corporations, from investing within the nation. Subsequently, it’s important for the federal government to take the required measures to draw international buyers, notably within the fintech, leisure, and crypto industries. By doing so, Nigeria is not going to solely stimulate its financial system however may even set up itself as a hub for innovation and know-how in Africa.
