Article was updated on June 4, 2021
Over 1.2 billion people live in Africa—the world’s second-largest and second-most-populous continent in the world. Apart from being famous for its exotic wildlife and beautiful landscapes, Africa is also known for its staggering unbanked population. Almost 77% of the entire African people don’t have access to banks and other financial services, and this unfortunate reality plays a critical role in the continent’s journey to financial freedom.
Interestingly, this unbanked continent found an innovative solution to its problems: Bitcoin (BTC). While this reigning cryptocurrency is primarily used as an investment tool in the west, Africa is using Bitcoin for what it’s made for—a financial passport. Let’s take a look at some of the African countries with the highest BTC adoption rates and how they’re utilizing the potential of this powerful digital currency.
Nigeria is experiencing economic and political hardship, which is seen as the biggest financial turmoil in 25 years. Nigeria is known as one of the largest oil-producing and oil-reliant countries in Africa. But when the COVID-19 pandemic hit different industries around the globe, the country also saw a significant decline in oil prices and production. These delays and crashes in the oil industry have greatly affected the economic growth in many countries, including Nigeria.
On top of this, Nigeria’s economic troubles have been intensified by a severe foreign currency shortage. This affects all the other sectors as well, not just the oil economy. Because of this, many manufacturing companies face the problem of importing goods and having to lay their workers off.
Some business analysts say that the government has been too slow to react to the crisis, particularly with the management of the Nigerian naira (NGN). A report from Reuters in April 2021 stated that “The multilateral institutions say a free-floating naira would help the economy withstand future shocks.” However, the Nigerian government has continued to adjust the currency’s rate little by little and restrict access to dollars for the importers of items that it considers non-essential. This has driven up demand for dollars in the black market, where it is traded at over a 30% premium.
The source of the economic woes of Zimbabwe extends back to more than 10 years. In 2009, the year Bitcoin was developed and introduced, Zimbabwe replaced its national currency—Zimbabwe dollar (ZWD)—with the United States dollar (USD). This was after rampant hyperinflation that had forced their national bank to start issuing 100 trillion Zimbabwe dollar notes.
While the country was hoping to solve this issue using the US dollar, they are now faced with a huge lack of fiat currency. Banks have started rationing US dollars, and Zimbabweans need to wait in line for hours to withdraw $50 from their accounts. Because of this, many people began to turn to Bitcoin and explore its endless potentials.
One of the many benefits they get from BTC is accessibility and convenience. They can quickly and instantly send or receive fractions of BTC without cash and they can also spend it easily outside the country. Now, there isn’t a need to go through the complicated steps to acquire money.
Although Ghana was previously seen as a model for African growth, things took a turn in 2013. Their economy has endured a growing public deficit, high inflation, and a weakening currency, Ghanian cedi (GHS).
Currently, there are over 25 universal banks and more than 130 rural banks nationwide in Ghana. However, as of January 2021, data from Statista.com revealed that only 57.7% of the population in Ghana own a bank account. This means that more than 42% of the country’s population still does not have access to local and global financial services. Like many other African countries, opening a bank account in Ghana is a complicated and expensive process.
The data also showed that Ghana’s mobile connection penetration rate grew to 140% in 2020. If the adoption of Internet use keeps increasing at this rate and services like 4G are introduced, Ghana can be a serious contender in the race for Bitcoin adoption in Africa. People in Ghana mainly buy Bitcoin to pay for goods online and to engage in cryptocurrency trading.
On top of that, Ghana also faced significant challenges brought about by the pandemic. In August 2020, a report from the World Bank stated that many businesses and firms in the country were forced to cut costs by limiting operating hours, cutting wages, and laying off workers.
This adverse situation pushed many industries to turn into digital solutions like cryptocurrencies, as over 130,000 businesses in Ghana had difficulty accessing financial services. BTC paved the way for Ghanaians to have accessible and convenient money transfers in and out of the country.
Egypt is also struggling with a rapidly declining national currency, the Egyptian pound (EGP). The Egyptian pound has dropped to more than 50% in the past year, but things are looking up. Egypt launched a reform program after its economy faced rising imbalances that led to high public debt, a widening current account deficit, and declining official reserves.
In November 2016, the government embarked on a program supported by the International Monetary Program Fund (IMF) to restore the stability of its finances and promote growth and employment while shielding the poor from the adverse effects of the changes.
Egypt has also faced the dire effects of COVID-19. Aside from the health crisis and the declining value of its fiat currency, Egypt’s sharp decline in oil prices also led to layoffs. An article from the Italian Institute for International Political Studies (ISPI) mentioned that the pandemic also brought challenges in cash transfers to local workers and caused the remittance figures to drop significantly in 2020.
Due to these changes, Bitcoin use in Egypt has rapidly gained popularity and trade volumes on crypto marketplaces have begun to skyrocket. However, an Egyptian Central Bank official issued a statement following the opening of the first Bitcoin exchange and stated that the bank has no intention of issuing legislation or passing a special law that allows trading digital currency, including Bitcoin. Cryptocurrency is also not recognized in financial and banking transactions in the country.
Bitcoin is more than just a digital money
Paxful has been witnessing a swift and steep growth in several African countries. According to the data from usefultulips.org, sub-Saharan African countries rank second in terms of regions with the highest trading volume worldwide.
Many Africans now enjoy the perks of using Bitcoin in their everyday lives, such as accessible and easy payments, cheaper and faster money transfers, and rewarding investments through crypto trading. People also use BTC to protect their money from the painful effects of inflation, among other things. It’s no wonder that Africa is now dubbed as the next frontier for BTC and other digital currencies.
How are you using Bitcoin as your financial passport? Let us know in the comments section below!