Across the continent, inflation rates have been steadily rising. Nigeria’s inflation rate has been hovering around the 20th percentile since the second half of the year and in October the rate rose to 21.09%, the highest inflation rate since 2005. In Ghana, the inflation rate rose to 40.4%, quadrupling the Central Bank’s 10% ceiling and representing a 30% increase from the previous year. Several people have taken to cryptocurrencies as an inflation hedge to escape the effects of this inflation.
Africa’s cryptocurrency market expanded by more than 1200% between 2020 and 2021, according to Chainalysis. In addition, four African nations—Kenya, Nigeria, South Africa, and Tanzania—are in the top 20 for crypto adoption worldwide. Instead of institutional investors, customers spearheaded this increase. Africa only makes up about 2% of all cryptocurrency transactions but makes up the highest rate of peer-to-peer services.
According to Chainalysis, African markets saw “greater grassroots adoption among everyday users,” with “a bigger share of transaction volume made up of large and small retail-sized payments than the worldwide average.” This means that crypto products are accessible and widely used by individuals, rather than just large businesses or institutions.
On another episode of TC Live, TechCabal aimed to offer professional advice to the average African worried about how to effectively combat inflation with cryptocurrencies. Speaking at the event were Arindam Roy, co-founder and CEO of Pillow Fund; Deborah Ojengbede, the CEO of AFEN Blockchain Group; and Chris Ani, the CEO of DABA.
Ojengbede mentioned two challenges that currently plague the continent and, as such, severely limit the adoption of crypto products on the continent. She referred to the current knowledge gap on the continent and the trust issue. A recent Luno survey found that 64% of Kenyans were unaware of and unfamiliar with cryptocurrency, compared to 55% of Nigerians and 56% of South Africans.
“However, we should expect to see more adoption as a lot of structure comes into the space and cryptocurrencies are constantly solving a lot of issues,” Ojengbede said. Roy went on to add that people would only seek out cryptocurrencies if they were aware of the solutions that the technology could provide. “If you solve a real problem and integrate it into current systems for non-speculative reasons, then people will come to you because you solve a problem,” he said.
To buttress his point, he referenced Latin America’s largest fintech, Nubank, launching its loyalty program on the Polygon blockchain. The move would help introduce the benefits and use cases of cryptocurrencies to the 70 million customers across Brazil, Mexico, and Colombia that use Nubank and hopefully onboard a lot more people to the applications of cryptocurrencies.
Ani stated that he believed adoption rates would increase if more people were made aware of the ease with which they could connect to the global dollarised economy via cryptocurrency.
Roy stated that the proliferation of data on the use cases of cryptocurrencies would go a long way in assuring people that crypto could help mitigate the effects of global inflation. To buttress his point, he gave the example of acquiring dollars through banking channels in Nigeria.
According to Roy, charges went as high as 3.5% and it could take up to 5 days for an individual to acquire dollars through banks. He then went on to advocate for stablecoins, a type of cryptocurrency pegged against fiat, and how much more effective it was in this use case.
When asked how, given the volatility of cryptocurrencies, African investors could mitigate these swings and their effects on the store of value, Ojengbede advised investors to research the market and how it affects cryptocurrencies. She also preached the gospel of diversification.
This event is brought to you by TechCabal in partnership with Pillow Fund.