Just over four months ago, entrepreneur Abolaji Odunjo made an intrinsic change to his company selling mobile phones in a bustling street market in Lagos. He started paying his providers in bitcoin.
Mr Odunjo sources accessories and gadgets from China and the United Arab Emirates. His Chinese providers asked to be paid in the cryptocurrency, he said, for convenience and speed.
The shift has boosted his profits, as he no longer has to buy dollars using the Nigerian naira or shell out fees to money-transfer companies. It is also one example of how, in Africa, bitcoin – the original and biggest cryptocurrency – is discovering the practical use that it has mostly neglected to elsewhere.
“You don’t have to pay charges, you don’t have to buy dollars,” the 30-year-old said, raising his voice over the sound of loud haggling and the honking horns of scooters.
Odunjo is among the a lot of people at the heart of a quiet bitcoin flourish in Africa, driven by payments from small businesses as well as remittances sent home from researchers, according to data shared exclusively by our content partners at Reuters and interviews with around 20 bitcoin users and five cryptocurrency exchanges.
Monthly cryptocurrency transports to and from Africa of below $10,000 – normally produced by people and tiny businesses – jumped more than 55% in a year to reach $316 million in June, the data from US blockchain research company Chainalysis shows.
The number of monthly transfers rose by nearly half, exceeding 600,700, according to Chainalysis, which says the research is the most comprehensive effort yet to map out global crypto use. Much of the activity took place in Nigeria, the country’s biggest market, combined with South Africa and Kenya.
This represents a change for bitcoin that, despite its arrival as a payments tool over a decade ago, has largely been used for speculation by financial traders instead of for commerce.
Exactly why a flourish in Africa?
Young, tech-savvy populations that have adapted fast to bitcoin; poorer local currencies which make it harder to get bucks, the de facto currency of international trade; and elaborate bureaucracy that complicates currency transfers.
The bitcoin consumers interviewed by journalists at our partner news agency Reuters, in accordance with five countries from Nigeria into Botswana, said the cryptocurrency was assisting individuals earn their businesses nimbler and more profitable, and helping those working in areas like Europe and North America hang on to a lot of the earnings they send home.
Yet risks abound.
Bitcoin and other cryptocurrencies are unregulated in many countries and their legal status is unclear, meaning there isn’t any safety net and little recourse should you lose funds.
For all, converting local currencies to and from bitcoin is based on casual brokers. Rates are volatile, and buying and selling is a complex process that demands technical knowledge.
TO SHANGHAI WITH CRYPTO
A steady stream of customers goes and comes from Odunjo’s store, one of a dozen units along a dark corridor within an indoor section of the market called Computer Village.
Odunjo makes two or three transports a month of approximately 0.5-0.7 bitcoin ($5,900-$8,300) each, to suppliers in Shanghai and Zhangzhou. East Asia, Chainalysis found, is among the top partners for bitcoin trading with Africa.
Odunjo’s trades offer you a microcosm of the wider tendencies at play in both Nigeria and throughout the continent.
In Nigeria, little cryptocurrency transfers totalled nearly $56 million in June, nearly 50% over a year before. The amount of transactions jumped over 55% to 120,000.
Gauging how cryptocurrencies are used in particular locations is demanding, however. Digital coins offer you a high level of anonymity, and though the worth of transactions can be tracked on the blockchain, the identity or whereabouts of an individual can’t.
Chainalysis, which monitors crypto flows for fiscal firms and US law enforcement, accumulated the data by analysing web traffic and trading routines, though places could be jaded by virtual private networks. It divided transfers of below $10,000 from larger sums shared among traders.
NAIRA’S LOSS, BITCOIN’S GAIN
With Nigeria’s oil-dependent economy rocked by reduced crude costs and COVID-19, the central bank has double devalued the naira this year. Because of this, Odunjo and other importers must pay more to buy increasingly rare dollars.
The naira’s fall has pushed several Nigerians towards bitcoin, the interviews revealed, as they search ways of purchasing goods from overseas without needing to get dollars.
Sylvester Kalu, who runs a clothing starch manufacturer in Uyo, eastern Nigeria, utilises bitcoin to buy supplies from Istanbul and Shenzhen.
“Everything is oil. When the price of oil dropped, forex became scare,” he said.
“That became a very big problem.”
The 30-year-old stated his transactions totalled about two bitcoin (approximately $20,000) per moment, including, “I don’t need anyone in the banks, I don’t need a person to use the back door to get dollars.”
Timi Ajiboye, who runs Lagos trade BuyCoins, said its yearly cryptocurrency volumes jumped three-fold to $21 million in June after the naira was devalued in March.
Exchanges across Africa spoke of a similar boom.
Yellow Card, that works in five states, said its yearly crypto volumes had jumped five-fold in 2020 to $25 million in August. A big driver was employees using bitcoin for remittances, it added.
Luno explained the joint monthly bitcoin trading volumes of all market participants in South Africa and Nigeria had jumped by half of this year to more than $536 million in August.
For a number of people working overseas, in other continents or other African nations, sending money home through bitcoin could be faster and cheaper.
A Nigerian worker in London sending GBP 100 (approximately $132) in money to Lagos via a large conventional money-transfer company, for example, would pay fees of about 5%. Costs are lower when sending larger amounts or with a debit card, however, the exchange rates on offer are generally a few percentage points less favourable than the market rate.
Bitcoin fees vary based upon the broker or exchange, but would typically total approximately 2%-2.5 percent for sending GBP 100.
Nevertheless both over-the-counter and markets (OTC) brokers take dangers, from hacks to scams.
And bitcoin, although handy for transports, isn’t much use on the floor – shops and landlords seldom accept it, as an example. This implies friends or family sent funds by workers must convert it back to traditional currency, often by means of a broker at their conclusion, introducing additional danger.
Yet the bitcoin consumers interviewed said many OTC brokers, who rely on word-of-mouth reviews, served reliably in an increasingly competitive marketplace and so were loath to imperil the reputations they needed to stay in operation.
And for a growing number of people, the potential benefits outweigh the advantages.
“In most African countries, there are lots of government restrictions that bitcoin takes away.”
The team at Platform Executive hope you have enjoyed this news article. Initial reporting via our official content partners at Thomson Reuters. Reporting by Alexis Akwagyiram in Lagos and Tom Wilson in London. Additional reporting by Nneka Chile in Lagos. Editing by Pravin Char.
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