Nigeria, the largest economy in Africa, is currently facing a significant obstacle in attracting foreign investments, despite a remarkable increase in the adoption of digital currencies.
A Detailed Analysis
According to official figures recently released by the National Bureau of Statistics (NBS), Nigeria has experienced a considerable decline of 33% in foreign direct investment (FDI) in 2022. The decrease has been attributed to a significant shortage of dollars, which has also discouraged crypto companies from exploring business opportunities in the country.
The FDI amount has fallen from $698 million to $468 million, representing a drop of approximately 33% compared to the previous year. Additionally, the data reveals that FDI has plummeted by almost 90% from its peak of $4.7 billion in 2008.
Reasons for this Decline
Although Nigeria has seen significant growth in the adoption of cryptocurrencies, the lack of foreign investment in the country can be attributed to the fact that cryptocurrency usage has not yet become mainstream.
According to Obinna Uzoije, a local data analyst and crypto enthusiast, the ban on financial institutions from facilitating crypto exchanges and the limited use of cryptocurrency in daily economic activities are the main reasons why foreign investment in Nigeria remains low.
As per the 2021 ban, the Central Bank of Nigeria has directed all commercial banks to close accounts held by crypto exchanges and other businesses using cryptocurrencies in the country.
Rate of Adoption of Crypto
While this may appear to be a setback, Nigerians are still showing a preference for digital currencies over traditional cash due to the frequent devaluation of the national currency, the naira.
According to recent reports, Nigeria ranked eighth in terms of cryptocurrency adoption and usage rate out of 154 countries surveyed. Despite the ban, the country’s interest in digital assets remains strong.
However, a domestic investment broker, Olumide Adesina, shared his observations on Twitter, revealing that no state has taken any steps to entice foreign investors to these sectors. He suggested that Lagos State should establish a credible technological and crypto community, akin to Silicon Valley, which could create a plethora of job opportunities in the near future.
