A total of over 1,2 billion people live in Africa, 77% of them people do not have a bank account. Financial inclusion or the lack of it is a huge problem. According to a study by the African Development Bank (AfDB) the most frequently cited reason for not having a bank account in Africa is the lack of funds to use one for. Over 80% of unbanked people surveyed gave this as a reason. Cost, distance and documentation needed were also cited as reasons. For example, if you would want to maintain a checking account in Uganda the cost of it is an equivalent of 25% of GDP per capita annually.
Bitcoin can solve a lot of problems in Africa. Although bitcoin is used as an investment mainly in the west, Africa is truly using it for what it was made for. Their financial passport. Anyone that has an internet connection has access. No need to travel far and pay high fees to set up a basic bank account. As 85% of the African population own a mobile phone, they can easily and quickly conduct their business with the digital currency.
The use of bitcoin has skyrocketed in Africa in the past few years. Here’s an overview of African countries with the highest growth in bitcoin use and why they are doing this.
Nigeria is currently experiencing economic and political hardship. This is seen as the biggest economic turmoil in 25 years. Nigeria depends on petrodollars for 70% of their revenues and 90% of earnings on exports. As the oil sector fell 14% and on top of this their economic troubles have been exacerbated by a severe foreign currency shortage, this affects all the other sectors as well, not just the oil economy.
Due to this manufacturers are having trouble importing goods and are having to lay workers off. Business analysts complain that the government has been too slow to react to the crisis, particularly with the management of the Naira. Nigerian Central Bank said in June it was moving to a “purely market-driven” currency system. However they continue to restrict access to dollars for importers of items that it considers non-essential such as rice and toothpicks. This has driven up demand for dollars in the black market, where it is traded at over a 30 per cent premium.
On top of the economic turmoil, Nigerians are also faced with Boko Haram. Across the region, the war against Boko Haram has forced over 2.6 million people from their homes
The source of the economic woes of Zimbabwe extend back to almost 10 years back. In the same year as bitcoin was created – 2009, Zimbabwe replaced its national currency with the US dollar. This was after a rampant hyperinflation that had forced their national bank to start issuing 100 trillion dollar notes. Although they were hoping to solve this issue by using the US dollar instead, they are now faced with a huge lack of the currency. Banks have started rationing US dollars and Zimbabweans need to wait in line for hours just to withdraw $50 from their accounts.
This is why Zimbabwean people are turning to bitcoin. They can obtain it without cash and also they can spend it easily outside the country.
Although Ghana was not so long ago seen as a model for African growth things have taken a big turn for the worse since 2013. Their economy has endured a growing public deficit, high inflation and a weakening currency.
A recent World Bank Study revealed that there are 26 universal banks and more than 110 rural banks nationwide in Ghana, however still over 70% of the adult population in Ghana have no bank accounts. Similarly to many other African countries, opening a bank account in Ghana is a cumbersome and expensive process.
Ghana’s National Communication Authority reports that smartphone penetration has grown 128% compared to the previous year. If the adoption of internet use keeps growing at this rate and services like 4g are introduced, Ghana is a serious contender in the race for bitcoin adoption in Africa. People in Ghana purchase bitcoin to pay for goods online and also for trading purposes.
Like many other countries mentioned above, Egypt is also struggling with a rapidly declining national currency. The Egyptian pound has dropped more than 50% in the past year. Things are now looking up though. Egypt launched a reform program when its economy faced rising imbalances that led to high public debt, a widening current account deficit, and declining official reserves. The government embarked on an IMF-supported program in November 2016 to restore the stability of its finances, promote growth and employment, while shielding the poor from the adverse effects of the changes.
That all said, bitcoin use has gained popularity rapidly. Volumes on bitcoin marketplaces in Egypt are growing fast. The Egypt Central Bank official issued a statement following the opening of the first bitcoin exchange. He stated that the bank has no intention of issuing legislation or passing a special law that allows the trading of digital currency, including bitcoin. In addition, the cryptocurrency is not recognized in financial and banking transactions.
Paxful has seen a very fast and steep growth from above mentioned African countries. From getting feedback from the users they’ve gathered that in fact the users are purchasing bitcoin for gift cards and spending them online as normally they would have restraints in doing so. People are not speculating on the price of bitcoin but mainly using it for day to day use purposes. Africa has figured out how to solve their financial issues through bitcoin.