Nigeria, the largest economy in Africa, has been facing a severe shortage of dollars, leading to a decline in foreign direct investment (FDI). The National Bureau of Statistics (NBS) reported that FDI dropped by 33% in 2021, decreasing from $698 million in the previous year to $468 million. The situation is worrying as FDI has decreased by 90% since its peak in 2008, reaching a new low in 2021. The scarcity of foreign investment in the country has led to a significant setback for the growth of the economy.
Despite the decline in FDI, the adoption of cryptocurrencies in Nigeria has grown exponentially. Many Nigerians prefer to store their money in digital currencies rather than the national currency, the naira, due to its constant devaluation. In fact, Nigeria ranked eighth in the world in terms of crypto adoption and usage rate in Chainalysis’ 2020 Cryptocurrency Geography Report. This exponential growth in crypto adoption rate in Nigeria was expected to encourage more foreign investment in the country. However, the shortage of dollars has discouraged foreign crypto companies from investing in Nigeria.
The Central Bank of Nigeria (CBN) banned cryptocurrency transactions in February 2021, directing all commercial banks to close accounts belonging to crypto exchanges and other businesses that deal with cryptocurrencies. The ban has further discouraged foreign investors from entering the market.
Despite the challenges, Olumide Adesina, a certified investment trader, tweeted that no state in Nigeria has taken the initiative to attract foreign investors in the fintech, entertainment, and crypto industries, despite the fact that Nigerians “love” these sectors. In another tweet, Adesina highlighted that building a real tech and crypto community like Silicon Valley in Lagos state would create thousands of direct jobs.
In response, Lagos State Governor, Babajide Sanwo-Olu, announced proposals for crypto adoption in the state, according to local media reports. The initiatives proposed by Sanwo-Olu include establishing a dedicated sandbox regulatory framework for cryptocurrencies, creating a crypto-focused innovation hub, and providing incentives for businesses that accept crypto payments. These initiatives are expected to encourage foreign investors to enter the Nigerian market and to boost the growth of the economy.
In conclusion, Nigeria’s dilemma is that while the adoption of cryptocurrencies has grown exponentially, the country is facing a severe shortage of foreign direct investment. The shortage of dollars has discouraged foreign investors, including crypto companies, from investing in the country. Therefore, it is essential for the government to take the necessary measures to attract foreign investors, particularly in the fintech, entertainment, and crypto industries. By doing so, Nigeria will not only stimulate its economy but will also establish itself as a hub for innovation and technology in Africa.