The problem of foreign investment exists in the largest economy in Africa, despite the exponential growth in crypto adoption.
Last year, foreign direct investment (FDI) in Nigeria, the largest economy in Africa, dropped by 33% due to a severe shortage of dollars. This has also discouraged crypto companies from expanding into the country. In 2022, investment declined to $468 million from the previous year’s $698 million, with FDI decreasing by approximately 90% since its peak of $4.7 billion in 2008, according to data from the National Bureau of Statistics (NBS).
The adoption of crypto in Nigeria has grown at an exponential rate. There are active adult crypto traders in the country, with many citizens now preferring to store their money in digital currencies over fiat cash due to the constant devaluation of the national currency, the naira. Nigeria ranked eighth in crypto adoption and usage rate out of 154 countries in Chainalysis’ 2020 Cryptocurrency Geography Report. However, this adoption rate has not encouraged more foreign crypto investment in the nation.
In an interview with Cointelegraph, local data analyst and crypto enthusiast, Obinna Uzoije, said 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. Uzoije explained that the lack of use of crypto in day-to-day economic activities and the ban on financial institutions from servicing crypto exchanges were to be blamed 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, Olumide Adesina, a certified investment trader, tweeted that despite Nigerians “loving” crypto, fintech, and entertainment, there has been no initiative to attract foreign investors in those areas. Adesina added that building a real tech and crypto community in Lagos State like Silicon Valley would create thousands of direct jobs.
Lagos State Governor, Babajide Sanwo-Olu, has proposed initiatives to promote crypto adoption in the state, such as establishing a dedicated sandbox regulatory framework for cryptocurrency, creating a crypto-focused innovation hub, and providing incentives for businesses that accept crypto payments, according to local media reports.