Blockchain companies are booming in Nigeria. As well as being Africa’s largest economy, it is the region’s biggest blockchain-based financial services provider, home to more than 200 fintechs – that is almost half of over 400 active fintech companies across the continent.
Growth in the industry has been aided by significant investor backing. Last year, Nigeria’s fintech startups saw funding rounds from various global investors and secured up to $122 million in funding – 25 percent of the total $491.6 million raised by African tech startups. Between 2014 and 2019, they secured over half a billion dollars ($600 million) in investments according to a McKinsey report.
The combination of a youthful population, increasing smartphone penetration, and a focused regulatory drive to increase financial inclusion and cashless payments create a conducive and thriving enabler for the fintech industry in Nigeria to continue growing, the report says.
With that in mind, the Nigerian government has set a target to rake in $10 billion from the novel blockchain technology, which powers most fintech services, by 2030. This comes as authorities now see the need to position the country to capture revenue from the value chain.
“Looking at our youthful population, which is mainly digitally native and our strategic position in Africa, we are looking at how we can get at least around $6-10 billion from this by the Year 2030, and this is doable looking at our strategic and huge payment and financial services sector,” said Inuwa Kashifu Abdullahi, Director-General of the National Information Technology Development Agency (NITDA).
Abdullahi, who was speaking at a Stakeholder Engagement for the Review of the National Blockchain Adoption Strategy in Abuja on Monday, said the government is poised to harness the potential in blockchain technology, which can also be used in many other sectors such as health and education apart from financial services.
“Nigeria is already one of the hottest places when it comes to tapping from this. We are coming up with a strategy that will help to capture value from the financial services from the land administration, from education, and from healthcare because blockchain is going to play a key role in terms of breaking and tracing products and services,” he said.
Abdullahi noted that a recent publication by PwC indicated that blockchain will, in the next 10 years, contribute $1.76 trillion to the global gross domestic product, and cited as an example China, which recently launched its national blockchain network usable by businesses globally.
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“Therefore, we want Nigeria to be strategically placed to capture value for this economic potential of Blockchain,” he said, adding that it was such prospects that informed the decision to get all the stakeholders in one room to brainstorm and come up with a strategy for Nigeria to benefit from the technology.
Nigeria currently has no legal framework or regulation guiding the use of blockchain but that looks set to change. Based on the move by NITDA to increase the technology’s adoption in the country, the landscape will definitely be subject to regulatory guidelines while companies employing the technology may be taxed by the regulator.
That is similar to the recent move by the Nigerian Securities and Exchange Commission to regulate crypto and blockchain-based digital assets offerings in the country. In September, the capital markets regulator released proposed guidelines for the market, which mandate all crypto assets and tokens classified as commodities and securities subject to SEC regulations. The synchronised move by the SEC and NITDA seems part of the government’s plan to “capture value from blockchain,” as Abdullahi said.
While welcoming the planned regulation, industry stakeholders have called for a collaborative approach to the formation of policies so as not to stifle innovation in the landscape as blockchain-based startups are thriving in the country, especially in the fintech sector, without any centralised authority or government regulation.
In terms of mitigating the risks involved in adopting blockchain, Abdullahi said: “What we are looking at is to identify a set of choices, the strategy is about your choices, the dos, and don’ts. At the end of the strategy, we are going to identify the key risks and the mitigant, how can we mitigate those risks so that we can know our dos and don’ts and how we can capture values from the Blockchain.”
A representative of the Central Bank of Nigeria, Fadele Adeolu, while speaking at the event, pledged the apex bank’s commitment to the initiative, assuring that the CBN is “fully committed to the initiative that will drive the development of the economy.”
In his presentation titled, “An Overview of the National Blockchain Adoption Strategy,” a blockchain expert, Abdulsalam Umar, said the technology will reduce cost and improve security in the country owing to blockchain’s conducive environment.