Nigeria, the largest economy in Africa, is facing a significant foreign investment problem despite exponential growth in the adoption of cryptocurrencies. According to the National Bureau of Statistics (NBS), foreign direct investment (FDI) in Nigeria fell by 33% in 2022 due to a severe shortage of dollars. This shortage has also discouraged crypto companies from expanding into the country. FDI decreased to $468 million from the previous year’s $698 million, and since its peak of $4.7 billion in 2008, FDI has declined by approximately 90%, according to data.
Although crypto adoption has grown exponentially in Nigeria, the lack of foreign investment in the country may be attributed to the fact that the use of cryptocurrency is yet to go mainstream. Local data analyst and crypto enthusiast, Obinna Uzoije, believes that the low rate of foreign investment in Nigeria can be attributed to the ban on financial institutions from servicing crypto exchanges and the lack of use of crypto in day-to-day economic activities.
The Central Bank of Nigeria directed all commercial banks to close accounts belonging to crypto exchanges and other businesses transacting in cryptocurrencies in the country as part of a 2021 ban. Despite the ban, Nigerians continue to show a preference for digital currencies over fiat cash due to the constant devaluation of the national currency, the naira. In Chainalysis’ 2020 Cryptocurrency Geography Report, Nigeria ranked eighth in crypto adoption and usage rate among 154 countries included in the study.
However, some experts believe that the lack of initiative by state governments to attract foreign investors in the fintech and entertainment industries may be contributing to the low investment rate. Local investment trader Olumide Adesina expressed his views on Twitter, stating that no state has taken the initiative to attract foreign investors in those areas. He suggested that Lagos State building a real tech and crypto community like Silicon Valley could create thousands of direct jobs.
Lagos State Governor, Babajide Sanwo-Olu, has proposed initiatives for crypto adoption in the state, according to local media reports. Some of the proposals include establishing a dedicated sandbox regulatory framework for cryptocurrency, creating a crypto-focused innovation hub, and providing incentives for businesses that accept crypto payments.
