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Cryptocurrencies: The rise of Nigeria’s digital abokis
Temperatures in Katsina, home state of Nigeria’s President Muhammadu Buhari, sometimes rise as high as 41°C in the middle of the day. Residents can swing by Orange Conte’ eatery on Tafawa Balewa Way to cool off with a water, sample some chicken, then pay in Bitcoin or Etherium. It is one of a small but growing number of small businesses in Nigeria that accept payment in cryptocurrencies.
With their love of get-rich-quick schemes Nigerians launched in with gusto when cryptocurrencies arrived on the scene. Citigroup reported in January 2018 that Nigerians were the third-largest holders of Bitcoin as a percentage of gross domestic product. That was before the currency plunged to a third of its value, from which it has not recovered. But though many people who bought in at the height got burnt, Nigerians may have shrugged it off more easily than most: after all, the naira, frequently subject to flash devaluations, has lost almost half its value against the dollar since 2016.
Beyond the bubble, cryptocurrencies have other lures for Nigerians. These range from under-the-radar profits to easy cross-border transactions: companies like SureRemit and Kobocoin now offer to pay remittances with their own digital currencies, saving on the high commission taken by banks and money-transfer services. Some of the bureaux de change are also diversifying their businesses to follow the trend. “Apparently, there’s a lot of: ‘Buy crypto, send to someone abroad to sell for you and ship you dollars or pounds’,” a staff member of a Lagos-based Bitcoin exchange tells The Africa Report anonymously.
All this has led to the rise of a new Nigerian phenomenon: the digital aboki. While the central bank attempts to control inflation by releasing a limited amount of dollars on Mondays, mallams (Hausa for ‘learned men’ and abokis (‘friends’) sit in the parking lots of airports, plush hotels and select sections of popular markets, operating as currency traders on the ‘parallel’ or black market. Their flowing robes are mini bank vaults – holding wads of several currencies, colourful business cards and a calculator or two.
Digital abokis, on the other hand, tend to be young and their wallet is a smartphone. Some accept cash from their clients and perform the ‘crypto’ transaction in front of them, while others have an entirely virtual relationship with their clients.
Musa Sharu, a recent graduate in urban and regional planning from the Federal University of Technology, Minna, is clutching an iPhone when he walks into the lobby of the Royal Tropicana in Kano. He got involved in trading cryptocurrencies in April 2016 after a pep talk from a classmate who dropped out in his fourth year to trade these digital assets full-time in Lagos. The classmate introduced Sharu to a schoolmate nicknamed ‘Crypto Gafar’. The two have never met in person but Crypto Gafar continues to mentor Sharu on instant messaging platform WhatsApp.
“No office for me,” Sharu tells The Africa Report. “I do my deals through calls, WhatsApp, Telegram and text messages. I place messages in groups, too, and people reach me from everywhere, even Abuja.”
Fast and fat
‘Ambassador’ Smart Oluwadola, an itinerant peddler of cryptocurrencies, says a friend introduced him to the trade in August 2017. Oluwadola abandoned his job network-marketing health supplements and has been buying and selling Bitcoin, Ethereum, Litecoin, Ripple and many others since then. He also teaches trading seminars online and offline.
“People are responding to it better and faster, and the profits are faster and fat,” he says. “It depends on the market boom, but I have made at least some millions like that. Anytime I travel to anywhere, I stay in hotels and my partners always meet me there while I meet new clients everywhere, either online or offline.”
This is part of a wave of change creeping across parts of the traditionally conservative north of Nigeria, which has significantly lower literacy levels and a lower degree of internet penetration. Sanusi Ismaila, founder of Kaduna’s CoLab, the first technology innovation hub in northern Nigeria, says: “Even if the north becomes ahead [of the south], not all of us will realise it because we tend to see things from an elitist perspective. We are expecting to see people who went to school but […] some of these people contributing to these trading clubs, a lot are artisans and market traders. So in a way they are ahead because their mates in Lagos won’t do the same.” He adds: “What might also happen is that [cryptocurrencies] can become a way to bypass the naira. Kano traders do a lot of international trade and handle a lot of foreign currencies. People could be smuggling textiles into Kano and paying through channels that you can’t trace.”
In WhatsApp and Telegram cryptocurrency chatrooms across Nigeria, group administrators take their job of recruiting new members seriously, adding them only after verification by middlemen. It is a tactic that independent merchants like Sharu use while sounding out new clients or vice-versa.
Sharu says he remembers starting out with N25,000 worth of Bitcoin. He now also trades in Ethereum from the safety of his banking app anchored to his local naira-denominated bank account. Transfers from it to his trading platform app are reflected within an hour, sometimes in seconds. Transactions from the app to his bank account take 12-24 hours. A few days before our meeting, a lady he has never met before sent him N7.8m to purchase two Bitcoins. He says his profit is usually N100,000-N150,00 per single transaction. Sometimes he buys the coins at a lower price from his friends to drive up the margins. Sharu also tracks price fluctuations by subscribing to email updates from Luno, his favoured trading platform, and Remitano, one of its rivals.
Not legal tender
“You can buy from Luno with N200 or N500,” Sharu says. “I have one or two buyers a month on average, and I’m okay with that. Some people have more clients so they make profits of N500,000-N1m monthly.”
At Kano’s Alhamsad Plaza, opposite Shoprite, Trade Coin Club, an investment club with origins in Belize, has set up shop. Its brochure states that members can pool their funds and use an automated trading software to carry out transactions with minimal risks. The two clerks on duty refuse to say more, scared that the attention may bring with it a clampdown from the CBN and other government agencies.
In March 2018, the Central Bank of Nigeria (CBN) warned Nigerians against investment in cryptocurrencies, emphasising that virtual currencies are not legal tender in the country. In its press statement, the bank highlighted the fact that “dealers and investors in any kind of cryptocurrency in Nigeria are not protected by law, thus may be unable to seek legal redress in event of failure of the exchangers or collapse of the business.”
The Senate – after a season of nationwide gnashing of teeth due to heavy losses in the infamous MMM Ponzi scheme just a couple of years ago – has also admonished the CBN to educate citizens about “the dangers” of Bitcoin. Following the CBN warning, in April thousands of ‘investors’ discovered they had been scammed by a Bitcoin-trading company in Calabar that had made off with millions of naira entrusted to them.
“Many are interested [in cryptocurrency] but are scared,” says Sharu. “This is an Islamic state […] so some people ask if it is Islamically okay. Also, some people want to see physical products. Had it been a physical coin, so much more people would have bought [it].”
From the September 2018 print edition
Top Photo: Counting naira at a bureau de change: the currency’s frequent devaluations and the parellel market have led some nigerians to hedge in bitcoin
Credits: Sunday Alamba/AP/SIPA