Overview
The Covid-19 pandemic caused a fall in the output of goods and services, negatively impacting the economy and resulting in thousands of jobs being lost. Various estimates suggest that unemployment rates in some regions of Africa reached 80% in 2021 and continue to rise. According to the World Bank, about 350 million adults in Sub-Saharan Africa have no access to banking services.
Against this background, crypto technology can:
- boost trade
- increase access to financial services for the population
- provide fast and affordable remittances
- stimulate economic growth and improve living conditions
Of particular interest to African citizens is the fact that cryptocurrencies can be safely stored, managed and accessed from any part of the world. Cashless transactions of this kind bring tangible benefits to society because of the anti-corruption opportunities. Blockchain technology is described as a natural response to decades of behind-the-scenes and unfair financial management.
Unemployed Africans can earn income using blockchain and crypto. The introduction of these technologies results in new jobs and the emergence of specialized training programs.
Financial analyst Temitope Busari notes the benefits of cryptocurrencies for the African economy.
She said:
“Cryptocurrency obviates the bureaucracies and high charges associated with bank transfers. The African economy has benefited from digital solutions for e-payments and transfers, and new players are leveraging financial technology to provide enhanced banking solutions.”
Nigeria Case Study
Nigeria is one of the fastest-growing crypto economies on the continent. On January 17, 2017, the Central Bank of Nigeria banned commercial banks and payment providers from dealing with cryptocurrency institutions. The ban has boosted interest in crypto.
In an economy covered by hyperinflation, investing in cryptocurrencies means preserving wealth. Nigeria’s crypto market boom is caused by the depreciation of the naira – the local currency has more than halved in value since 2015.
Many residents are using digital assets as a store of value to prevent the negative impact of inflation. By comparison, BTC returned 302,8% in 2020, while the annual inflation rate for Nigeria’s local currency was 15,75% in December 2020.
According to Statista, over $400 million worth of crypto assets were sold in Nigeria in 2021. The high cost of cross-border payments has encouraged Nigerians in the diaspora to send money back home using digital assets. In the first half of 2021, Nigeria topped Africa’s peer-to-peer (P2P) trading volume. Transactions reached $205,7 million, all of which came from two services, Paxful (77,2%) and LocalBitcoins (22,8%).
In late October 2021, the President of Nigeria announced the launch of its own CBDC, designed to affect the economy.
Financial and Non-Financial Applications
SMEs can create decentralized digital ledgers through blockchain-based data management systems. This is the technical foundation for financial applications, such as microcredit. Blockchain-based data management decentralizes access to financial services and opens access to them for small and medium-sized businesses.
Blockchain technology enables charitable fundraising. Local governments and investors can control the distribution of collected money and the realization of stated goals.
Blockchain-based data management technologies can create transparent tax collection, economic monitoring and governance systems. They are already being implemented in the health care and education sectors. In this way, blockchain technology can accelerate socio-economic development in Africa.
With the help of distributed ledger technology, families can keep records of property and land rights. Blockchain allows companies and individuals to create smart contracts and automate many processes. This reduces the influence of the bureaucracy and the importance of all kinds of intermediaries.
Prospects for Blockchain Technology in Africa
The specific vision of blockchain technologies in Africa’s infrastructure is clearly outlined in the upcoming African Union High-Level Panel on Innovation and Emerging Technologies (APET) report, titled: “Powering the African Vision: Harnessing Blockchain Technology for Africa’s Transformative Governance.” African governments are encouraged to explore blockchain-enabled technologies to develop the required enabling policy, infrastructural, regulatory and ethical frameworks. These frameworks can provide investment opportunities in blockchain and business solutions for the African continent.
