The Central Bank of Nigeria may not have an answer today on how to regulate cryptocurrencies, but demand for them is increasing and spinning up new businesses. Already there are notable bitcoin exchanges helping thousands of Nigerians buy, sell and invest in the virtual currency.
One of such exchanges is Luno.
Formerly BitX, Luno is a bitcoin company headquartered in London with operations in Indonesia, Malaysia, Nigeria, South Africa, the United Kingdom and 35 other European countries. The company facilitates bitcoin storage and transactions such as buying, selling and paying through its bitcoin wallet services. They also operate exchanges between fiat money and bitcoin.
BusinessDay recently spoke to Owenize Odia, Country Lead for Luno on how the bitcoin market in Nigeria is evolving.
Size of bitcoin market in Nigeria
“It is difficult to get a precise number of the market size in Nigeria,” Odia told BusinessDay. This is because “not all bitcoin platforms show their trading volume. If you look at the Luno Exchange, you will see that there was around 50 BTC traded on Luno in the past 24 hours (You can also move your mouse over the grey bars to see how much BTC was traded on days in the past).”
As a corporate rule, Luno does not disclose the number of customers it has.
Growth drivers for bitcoin in Nigeria
Odia reckons there are two factors driving increase in demand for bitcoin in the country. There is the factor that many Nigerians use it as a means of payment and as an alternative asset class.
She explains that the country’s global image problem due to cyber fraud activities discourages most online shops outside Nigeria to process payment from a local card. Bitcoin therefore provides a viable option given that payments in the virtual currency have some level of transparency and cannot be “blocked” based on the origin of the transaction.
A Greater number of Nigerians buy bitcoin “to use it as a store of value, an alternative asset class. Since bitcoin is limited in supply and has a market value (in almost every country around the world), many people call it “digital gold”. It has aspects of gold (aspects of money), but it’s just easier to buy, sell and store. Many emerging market currencies have been struggling against the US dollar in recent years, so we are seeing more investors placing a small amount of their investment portfolio into digital currencies, to hedge against depreciation,” she said.
Long-term potential of bitcoin
Odia believes the virtual currency has potential to facilitate access to new ways of transacting for millions of unbanked Nigerians.
“Currently, however, most people who buy bitcoin have some disposable income left after paying their monthly bills. The majority of our Nigerian users use us on Android devices,” Odia said.
Regulators’ role in growth of bitcoin in Nigeria
The Central Bank of Nigeria which should lead the regulatory environment is still understudying the virtual currency. It held a ‘Virtual Currencies as an Emerging Medium of Exchange’ conference earlier this year with various stakeholders in attendance.
Odia says despite the lack of regulation in the segment, most exchange owners are already preparing for the possibility.
“We expect and welcome regulation in the industry. We (Luno) follow strict anti-money laundering, anti-terror financing, know-your-customer and various consumer protection measures,” she said.
Luno’s compliance procedures are based on those of regulated financial institutions. For the company, regulation will only enhance better customer relations as it will protect consumers and keep fraudulent operators out of the system.
Banks role in the future of bitcoin in Nigeria
How fast bitcoin will grow in the future may depend on the type of relationship that exists between banks and bitcoin operators.
Odia notes that banks are important because of the critical element of trust they have with the banking population in Nigeria.
“We certainly are not anti-bank; we rather see our services running alongside normal banking services. Where banks help people interact with the current local financial system. Our goal is to help people interact with the digital currency financial system and to be a bridge between local currencies (stored with banks) and digital currencies (stored with Luno),” Odia said.
