* Monthly crypto transfers to and from Africa rise 55% in a
year
* Much of the activity in Nigeria, South Africa and Kenya
* Driven by small businesses and migrant worker remittances
* Devalued local currencies, banking red tape boost demand
* However risks abound in a mostly unregulated crypto market
By Alexis Akwagyiram and Tom Wilson
LAGOS/LONDON, Sept 8 (Reuters) - Four months ago, Abolaji
Odunjo made a fundamental change to his business selling mobile
phones in a bustling street market in Lagos: He started paying
his suppliers in bitcoin.
Odunjo sources handsets and accessories from China and the
United Arab Emirates. His Chinese suppliers asked to be paid in
the cryptocurrency, he said, for speed and convenience.
The shift has boosted his profits, as he no longer has to
buy dollars using the Nigerian naira or shell out fees to
money-transfer firms. It is also one example of how, in Africa,
bitcoin - the original and biggest cryptocurrency - is finding
the practical use that it has largely failed to elsewhere.
"Bitcoin helped to protect my business against the currency
devaluation, and enabled me to grow at the same time," Odunjo
told Reuters from his two-by-eight metre shop.
"You don't have to pay charges, you don't have to buy
dollars," the 30-year-old said, raising his voice above the
sound of loud haggling and the honking horns of scooters.
Odunjo is one of many people at the heart of a quiet bitcoin
boom in Africa, driven by payments from small businesses as well
as remittances sent home from migrant workers, according to data
shared exclusively with Reuters and interviews with around 20
bitcoin users and five cryptocurrency exchanges.
Monthly cryptocurrency transfers to and from Africa of under
$10,000 - typically made by individuals and small businesses -
jumped more than 55% in a year to reach $316 million in June,
the data from U.S. blockchain research firm Chainalysis shows.
The number of monthly transfers also rose by almost half,
surpassing 600,700, according to Chainalysis, which says the
research is the most comprehensive effort yet to map out global
crypto use. Much of the activity took place in Nigeria, the
continent's biggest economy, along with South Africa and Kenya.
This represents a reversal for bitcoin which, despite its
birth as a payments tool over a decade ago, has mainly been used
for speculation by financial traders rather than for commerce.
Why a boom in Africa? Young, tech-savvy populations that
have adapted quickly to bitcoin; weaker local currencies that
make it harder to get dollars, the de facto currency of global
trade; and complex bureaucracy that complicates money transfers.
The bitcoin users interviewed by Reuters, based in five
countries from Nigeria to Botswana, said the cryptocurrency was
helping people make their businesses nimbler and more
profitable, and helping those working in places like Europe and
North America hang on to more of the earnings they send home.
Yet risks abound.
Bitcoin and other cryptocurrencies are unregulated in many
countries and their legal status is unclear, meaning there is no
safety net and little recourse if you lose funds.
For many, converting local currencies to and from bitcoin
relies on informal brokers. Prices are volatile, and buying and
selling is a complex process that demands technical knowledge.
In 2018, the Nigerian central bank warned cryptocurrencies
were not legal tender, and investors were unprotected.
TO SHANGHAI WITH CRYPTO
A steady stream of customers comes and goes from Odunjo's
shop, one of a dozen units along a dark corridor in an indoor
section of the market known as Computer Village.
Odunjo makes two or three transfers a month of around
0.5-0.7 bitcoin ($5,900-$8,300) each, to suppliers in Shanghai
and Zhangzhou. East Asia, Chainalysis found, is one of the top
partners for bitcoin trading with Africa.
Odunjo's trades offer a microcosm of the wider trends at
play in both Nigeria and across the continent.
In Nigeria, small cryptocurrency transfers totalled nearly
$56 million in June, nearly 50% more than a year before. The
number of transactions jumped over 55% to 120,000.
Gauging how cryptocurrencies are used in particular
locations is tough, though. Digital coins offer a high degree of
anonymity, and though the value of transactions can be tracked
on the blockchain, the identity or whereabouts of a user cannot.
Chainalysis, which tracks crypto flows for financial firms
and U.S. law enforcement, gathered the data by analysing web
traffic and trading patterns, though locations can be obscured
by virtual private networks. It separated transfers of under
$10,000 from larger sums common among professional traders.
NAIRA'S LOSS, BITCOIN'S GAIN
With Nigeria's oil-dependent economy rocked by low crude
prices and COVID-19, the central bank has twice devalued the
naira this year. As a result, Odunjo and other importers must
pay more to buy increasingly scarce dollars.
The naira's fall has pushed many Nigerians towards bitcoin,
the interviews showed, as they seek methods of purchasing goods
from overseas without having to buy dollars.
Sylvester Kalu, who runs a clothing starch maker in Uyo,
eastern Nigeria, uses bitcoin to buy supplies from Istanbul and
Shenzhen.
"Everything is oil. When the price of oil dropped, forex
became scare," he said. "That became a very big problem."
The 30-year-old said his transactions totalled around 2
bitcoin ($20,000) a time, adding: "I don't need anyone in the
banks, I don't need a person to use the back door to get
dollars."
Timi Ajiboye, who runs Lagos exchange BuyCoins, said its
monthly cryptocurrency volumes jumped over three-fold to $21
million in June after the naira was devalued in March.
Exchanges across Africa spoke of a similar boom.
Yellow Card, which operates in five countries, said its
monthly crypto volumes had jumped five-fold in 2020 to $25
million in August. A big driver was workers using bitcoin for
remittances, it added.
Luno said the combined monthly bitcoin trading volumes of
all market participants in South Africa and Nigeria had jumped
by half this year to more than $536 million in August.
IT'S A RISKY BUSINESS
For some people working abroad, in other continents or other
African countries, sending money home via bitcoin can be quicker
and cheaper.
A Nigerian worker in London sending 100 pounds ($132) in
cash to Lagos via a big traditional money-transfer firm, for
example, would pay fees of around 5%. Costs are lower when
sending larger amounts or using a debit card, but the exchange
rates on offer are typically several percentage points less
favourable than the market rate.
Bitcoin fees vary depending on the exchange or broker, but
would typically total about 2%-2.5% for sending 100 pounds.
However both exchanges and over-the-counter (OTC) brokers
carry risks, from hacks to scams.
And bitcoin, while handy for transfers, isn't much use on
the ground - shops and landlords rarely accept it, for instance.
This means friends or family sent funds by workers must convert
it back to traditional currency, often via a broker at their
end, introducing additional risk.
Yet the bitcoin users interviewed said many OTC brokers, who
rely on word-of-mouth reviews, functioned reliably in an
increasingly competitive market and were loath to imperil the
reputations they needed to stay in business.
And for a growing number of people, the potential rewards
outweigh the pitfalls.
"People are very adoptive of any technology that will make
their life easier," said Frankline Kihiu, a crypto broker in
Kenya's capital, Nairobi.
"In most African countries, there are lots of government
restrictions that bitcoin takes away."
($1 = 0.7585 pounds)
(1 bitcoin = $10,065)
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Africa's crypto hotspots https://tmsnrt.rs/2ERVphu
Crypto transfers soar in Africa https://tmsnrt.rs/3gpCPdG
Nigeria's crypto boom https://tmsnrt.rs/34PKEY5
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