Despite exponential growth in crypto adoption, Nigeria, the largest economy in Africa, is facing a severe shortage of foreign direct investment (FDI), according to a study by the National Bureau of Statistics (NBS). Last year, FDI dropped by 33% due to a shortage of dollars, which also discouraged crypto companies from expanding into the country. In 2022, investment declined to $468 million from the previous year’s $698 million, a decrease of approximately 90% since its peak in 2008.
Nigeria has a thriving crypto adoption rate with many citizens preferring to store their money in digital currencies over fiat cash due to the constant devaluation of the national currency, the naira. In Chainalysis’ 2020 Cryptocurrency Geography Report, Nigeria ranked eighth in crypto adoption and usage rate among 154 countries included in the study. However, the low rate of foreign investment in Nigeria could be attributed to the fact that the use of cryptocurrency was yet to go mainstream in the country.
According to Obinna Uzoije, a local data analyst and crypto enthusiast, the lack of use of crypto in day-to-day economic activities and the ban on financial institutions from servicing crypto exchanges were to blame for the low investment rate. The Central Bank of Nigeria directed all commercial banks to close accounts belonging to crypto exchanges and other businesses transacting in cryptocurrencies in the country as part of the 2021 ban.
In response to the NBS report, some experts have called for initiatives to attract foreign investors in areas such as crypto, fintech, and entertainment. Lagos State Governor, Babajide Sanwo-Olu, has proposed establishing a dedicated sandbox regulatory framework for cryptocurrency, creating a crypto-focused innovation hub, and providing incentives for businesses that accept crypto payments. These initiatives could help Nigeria attract foreign investment and establish a thriving crypto community.
