Crypto Adoption in Africa - Becoming Increasingly Significant in Some Countries

in LeoFinance3 years ago

Africa has the smallest crypto currency economy of any region in the world, with only $8 billion in value flowing in, and $8.1 flowing out (2019-2020 figures).

Screenshot 2021-07-31 at 14.03.55.png

(By contrast this compares to $61 billion received and $62 billion sent in Europe during the same period).

However, given the lower cost of living in many African countries compared to Europe, $8 billion is a significant sum, especially when we consider that all remittances from abroad (sent to Africa by African nationals living in other countries) totalled $48 billion, as that $8 billion in crypto represents about 15% of the remittance total.

This is according to Chain Analysis' 2020 report on global crypto currency adoption.

The report also listed three African countries in the top 10 for crypto adoption, when cost of living is factored in, using the Purchasing Power Parity measure of GDP. Those three countries were Nigeria, South Africa and Kenya.

See here for the global overview I produced last week based on this report.

Smaller transfers are more significant in African countries than elsewhere

What Chain Analysis terms 'Retail transfers', or sums under $10 000 make up around 30% of all transfers of crypto in Africa. This is a higher percentage than other regions, which unsurprisingly have larger percentages of larger transactions.

Screenshot 2021-07-31 at 14.10.07.png

This means that in terms of day to day use by small businesses and 'ordinary people' crypto is having more of a relative impact in those African countries which are most enthusiastic in adoption crypto.

A lot of this is coming into Africa from regions where there high numbers of African ex-pats such as North America, Europe and East Asia.

Data from one popular exchange, Paxful, shows that Africa has the largest number of transactions of any region, yet one of the smallest volumes of money being sent.

Half of transfers are between Africa and China

About half of the $8 billion worth of crypto which flowed in and out Africa in 2019-2020 was to and from China - most likely due to Chinese mining operators taking advantage of cheap electricity prices in some African countries - China has been a key player in many African countries for years, and there are a lot of business ties between the two regions, so this is no surprise.

Screenshot 2021-07-31 at 14.12.16.png

It would be fascinating to find out the extent to which people in Africa have benefitted from these mining operations, but something tells me the deals struck will not be easily accessible, and it's highly likely that the gains the Chinese are making are more than 10 times what the African countries are receiving in benefits.

I'm not sure how this will be affected by the recent Bitcoin mining ban, I guess it depends on the nature of these mining operations' ties with the relevant agents of the Chinese State. (Talk about a black box!)

Crypto helps with large transfer fees between African countries

According to the World Bank, transfers between some African countries below $200 can charge up to 15% fees - crypto transfers solve this problem (unless you're talking about Bitcoin on a busy day), and some entrepreneurs are even setting up their own international businesses to facilitate these low fee transfers - transferring currency into Bitcoin, sending on the Bitcoin and then transferring that into the second currency.

Crypto Helps with International Business Ventures

The report also cites an example of business ventures in Africa which use crypto to pay for imports from China, to get around the fact that their banks don't allow them to wire money to China.

This Coin Desk report from August last year cites examples of some Nigerian import businesses that are sending thousands of dollars worth of crypto to China to avoid 'trade hurdles'.

To my mind this is one of the most profoundly excellent use cases of crypto I've heard about!

Crypto is used to protect against fiat inflation

One of the most interesting correlations in the report is between the inflation rate of fiat currencies and crypto transactions....

Screenshot 2021-07-31 at 14.35.45.png

Crypto transactions increase shortly after increases in fiat inflation, suggesting that people in Africa turn to crypto possibly using crypto as a means to prevent the value of their savings falling because of fiat inflation.

This article from the BBC discusses how more than 30% of Nigerians are using crypto, and cites the fact that the Nigerian Government devalued the Naira by almost 25% last year alone!

Final thoughts - this is only SOME African countries....

NB - it's important not to generalise these findings to the whole of Africa - the three countries above represent most of the Crypto transactions, with a handful more 'moderately enthusiastic' if you like, while for many African countries there is no data.

Countries with very high levels of adoption are Nigeria, Kenya and South Africa, and outside of those Ghana is one to watch too, beyond that crypto is much less widely used....

Which could well mean that Crypto is EVEN MORE significant in a handful of countries, those mentioned above!

Find out more.

I thoroughly recommend you read the full report here, it's fascinating reading, and based on some sound data collection.

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Using crypto for trade purposes is going to increase more and more. Here in South Africa obtaining "permission" to use dollars via the bank is not easy and being able to bypass the current system is definitely a huge benefit. Why use a system that is costly and slow when you have crypto to solve these issues. As long as your supplier or partner you are dealing with is happy to accept crypto then there is no issue.

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Isn't inflation quite a big issue in SA too, which I guess can only help drive crypto adoption.

The threat of the rand losing value plus inflation is definitely a driving force behind adoption.

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Very interesting post ! Going through the report qt the moment. Impressed by the China + Africa payments 💰

I love big data reports like that, especially whey they're free!

Despite being an impoverished and somewhat forgotten continent, they are demonstrating all the potential that can be taken advantage of cryptocurrencies, since it is these crises that help people to look for other ways of doing things.

Hopefully in Venezuela more things can be achieved in terms of cryptographic technology.

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Thats a nice report.

I believe that the Nigerian community is very strong her eon Hivehopefully we'll see that spread to other countries

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Nigeria seems to be a real crypto powerhouse, and you certainly see that on Hive for sure!

Yes, In Nigeria aoption keeps increasing daily despite the fact that traditional banks has been ban to involve in crypto transactions which stop direct withdrawal of Naira from a centralized exchange like Binance into our local bank account but again the ban brought in huge awareness which led to increase of peer-to-peer transactions within the country and the crypto enthusiast within the region. the adoption will continue as many of us has take it upon ourselves to educate people more about the digital system of money.

Great article man


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Nigeria really stands out as a crypto boom country more than any other, I think you see it here on Hive, Nigerians are well represented!

How do people get crypto out to fiat in Nigeria, what options are there?

Some banks in the UK have stopped crypto deposits/ withdrawals to exchanges, so it is happening in Europe too, it's just that it's easy to switch to another bank, for now at least!

How do people get crypto out to fiat in Nigeria, what options are there?

Platforms like Binance help facilitate p2p transactions, there are also other platforms that people use like Paxful, localBitcoins, some local exchanges and WhatsApp groups,...these days I even hear of walk in shops.

As long as peer to peer cannot be stopped, crypto here will continue to grow.

Lots of options, that's very encouraging!

How do people get crypto out to fiat in Nigeria, what options are there?

Platforms like Binance help facilitate p2p transactions, there are also other platforms that people use like Paxful, localBitcoins, some local exchanges and WhatsApp groups,...these days I even hear of walk in shops.

As long as peer to peer cannot be stopped, crypto here will continue to grow.

You make some solid points. I think developing countries have a whole lot to gain from Crypto, perhaps more than the more developed ones. I reckon poorer countries have a great opportunity for creating wealth for themselves and their citizens by embracing crypto early

I agree - as long as people are at that level where they can afford a mobile phone and an internet connection.

The bottom billion or so are still going to be left out of the loop.

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In Spanish speaking countries cryptos are too present every day, I normally interact with 2 people a day who know or have heard about cryptocurrencies, it is incredible also in Central American countries where bad economic practices have taken their toll on their people.

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