Why Nigeria dropped out of the global cryptocurrency adoption index top 10 list

Nigeria, Africa's largest crypto market, moved from the 5th position in 2021 to the 11th position according to the 2022 Global Crypto Adoption Index report released by Chainalysis, a blockchain analytics platform.

Why Nigeria dropped out of the global cryptocurrency adoption index top 10 list
Litecoin, Bitcoin and Ethereum are three leading cryptocoins

Nigeria and Kenya have dropped out of the top ten countries globally that have adopted cryptocurrencies, according to the 2022 Global Crypto Adoption Index report released by Chainalysis, a blockchain analytics platform.

Nigeria, Africa's largest crypto market, moved from the 5th position in 2021 to the 11th position while Kenya dropped to 19th from 6th. Morocco, which was not in the ranking last year, overtook Kenya, Togo, South Africa and Ghana to presently occupy the 14th position.

Why the decline?

Most industry observers might be curious as to what triggered the decline by Nigeria. But analysis of the report showed that it was due to the change in metrics used by Chainalysis for the 2022 Global Crypto Adoption Index.

The 2021 edition of the report used crypto adoption of the average person and transactions, new cases, and individual savings. Conversely, the 2022 index focused on institutional activity, meaning where users are putting the most significant part of their cryptocurrency money.

In Nigeria, recall that in 2021, the Central Bank of Nigeria (CBN) placed a ban on transacting in cryptocurrencies or facilitating payment for cryptocurrency exchanges. Although a significant number of P2P transactions go on in the country, there’s still a lack of significant institutional activities.

The reason for the decline according to Senator Ihenyen, the President of Stakeholders in Blockchain Association of Nigeria (SiBAN) is due to the 2022 metrics which are far from Nigeria’s strong areas.

“The major reason Nigeria is not in the first 10 is that the Chainalysis report looked beyond the areas where Nigeria is known to be very strong. For instance, while Nigeria scores highly in grassroots adoption with its ever-growing P2P market, Nigeria is not as strong when it comes to other areas such as centralised retail transactions, DeFi, and institutional adoption”, he explains.

He reiterated Nigeria has a low purchasing power compared to other countries on the list such as the United States, Indonesia and Brazil. So Nigeria relies on crypto to remit money, hedge inflation and pay for cross-border services mostly through P2P exchange.

“This is where we are strongest. And this is why for example the United States, which is currently ranked 3rd on the global crypto index, ranks 111th when P2P transactions are solely considered. Nigeria even beats Vietnam, the no. 1 country in crypto adoption, in P2P crypto transactions.”

“Institutional adoption in Nigeria, as long as the CBN is yet to change its stance on crypto, will continue to be impaired. Although with the new SEC rules on digital assets in Nigeria, I expect some little gains in institutional adoption, but again if the CBN supports the SEC by ensuring licensed operators have access to bank accounts”, he adds.

More on the 2022 Global Crypto Adoption Index

The 2022 Global Crypto Adoption Index, is a part of the 2022 Geography of Cryptocurrency Report by Chainalysis that will be released later.

The index considers the adoption of digital assets across 154 countries and compares them using five different “sub-indexes,” including on-chain cryptocurrency value received at centralised exchanges, the on-chain retail value received at centralised exchanges, peer-to-peer (P2P) exchange trade volume, on-chain cryptocurrency value received from DeFi protocols, and on-chain retail value received from DeFi protocols.

The five different sub-indexes are all weighted by purchasing power parity (PPP) per capita, a metric economists use to compare standards of living between countries. The goal of releasing the report annually, according to the Chainalysis report is to help countries keep tabs on their cryptocurrency performance year on year:

“The goal of this sub-index is to rank each country by total cryptocurrency activity occurring on centralised services, and to then weight the rankings to favour countries where that amount is more significant based on the wealth of the average person and value of money generally within the country.”

The report showed that although global adoption of cryptocurrency reached its all-time high in Q2 2021. Since then, adoption has moved in waves – it fell in Q3, which saw crypto price declines, rebounded in Q4 when the prices rebound to new all-time highs and has fallen in each of the last two quarters as we’ve entered a bear market. Still, it’s important to note that global adoption remains well above its pre-bull market 2019 levels.

The data also suggests that the people who were attracted by rising prices in 2020 and 2021 stuck around, and continue to invest a significant chunk of their assets in digital assets.

Big, long-term cryptocurrency holders continue to hold through the bear market, and so while their portfolios have lost value, those losses aren’t locked in yet because they haven’t sold— the on-chain data suggests those holders are optimistic the market will bounce back, which keeps market fundamentals relatively healthy.

Vietnam retained its position last year as the global leading country for cryptocurrency and was followed by the Philippines and Ukraine.

Other noteworthy changes on the top 10 lists were India at the 4th, the United States at the 5th, Thailand at 8th and China back in the 10th position (this is despite the Chinese government’s crackdown on cryptocurrency activity, which includes a ban on all cryptocurrency trading announced in September 2021).

Here is a view of the top 20 countries on the index.

The 2022 Index indicates that the crypto adoption rate has slowed down globally overall. This is due to the incessant bearish market conditions. Although prices of crypto coins are still better than what they were at the earliest time of the crash.

Emerging markets dominate the index. The report used the World Bank categorisation of countries into one of four based on income levels and overall economic development: high income, upper middle income, lower middle income, and low income.

  • Ten are lower-middle income: Vietnam, Philippines, Ukraine, India, Pakistan, Nigeria, Morocco, Nepal, Kenya, and Indonesia.
  • Eight are upper-middle income: Brazil, Thailand, Russia, China, Turkey, Argentina, Colombia, and Ecuador.
  • Two are high-income: the United States and the United Kingdom.

The report emphasised the purpose of the adoption of cryptocurrency by users in the lower middle and upper middle-income countries. “...Users in these countries rely on cryptocurrency to send remittances, preserve their savings in times of fiat currency volatility, and fulfil other financial needs unique to their economies. These countries also tend to lean on Bitcoin and stablecoins more than other countries.”