On a whole, Africa is regarded as a volatile continent and its denizens seem to be relying more on cryptocurrencies as a means of exchange rather than opting for local fiat currencies. This fact was highlighted in a new report that was put forward by a blockchain analytics firm called Chainalysis. The data published by the company makes it clear that a number of individuals and local businesses are making more use of cryptocurrencies, all in a move to avoid high fees, regulatory complications, and also currency instability. The volume of monthly transfers made to and from Africa has surpassed the 600,000 mark.
According to the data, there was a 55% increase in the total volume of transfers under $10,000 since June last year and they had reached a total volume of $316 million. As of now, the leaders of crypto transfers for the African continent are Kenya, South Africa, and Nigeria, which is Africa’s largest economy. A mobile phone retail store owner based in Lagos, Nigeria’s largest city, said that they had shifted to cryptocurrencies because of the speed and convenience they can offer. The owner, Abolaji Odunjo, is now paying his China-based suppliers in Bitcoin. He highlighted that using Bitcoin was protecting his business from the effects of the devaluation of the Nigerian Naira, allowing his business to grow more.
He further mentioned that opting for this method of payment-enabled him to save on high banking fees and it is definitely a better alternative than buying US dollars, which are becoming more and more expensive. A number of countries in Africa are struggling with devaluation and instability of their fiat currencies. In turn, this pushes up the demand for the USD, which is considered a benchmark currency and it only increases the cost of buying it. In the last decade alone, there has been a 50% decline in the value of some African currencies like the South African Rand, against the US Dollar.
Some other individuals were also interviewed about the use of cryptocurrency in Africa and all of them highlighted how crypto was helping them send money back home to their family members when they work overseas. The World Bank shared a post that documents the fee charged for fiat remittance across Sub-Saharan Africa. The average cost of making fiat remittances was recorded an 8.9% and some of the highest costs per transaction were recorded particularly in South Africa, where they were as much as 20%.
In contrast, the fee associated with Bitcoin are significantly lower as they are just below 3%. It was also reported by the World Bank that in 2019, the total of fiat that was sent to Sub-Saharan Africa was about $48 million, but they were expecting it to go down. It is expected that the total will be about $37 billion this year. At the same time, there is expected to an increase in the amount of cryptocurrencies that are being sent to Africa and they will probably surpass the $8 billion mark that was recorded last year.