Demystifying Africa #5: The imminent large-scale adoption of crypto in African society
Large-scale adoption in Africa?
By looking at the recent news headlines, it’s increasingly clear that technological innovations have been gradually making their way into the lives of Africans. The increase in smartphone penetration and adoption has fostered a new development in areas of African society, which was impossible in the past. These recent changes spotlight Africa’s investment environment, giving it a leg up that it never had before. The level of technology adoption that facilitates people’s ability to access the internet continues to rise and is becoming an increasingly common practice. Mobile devices and the internet have become the most important driving factors of social-economic change in African society.
This trend is further accelerated as many African countries have started to adopt bold policies aimed at building economies centered around modern technologies. With new policies and changes in social-economic factors, there is a new wave of adoption of blockchain and cryptocurrency space amongst the African youth.
A new report published by Cointelegraph shows that crypto users grew by +2500% in Africa in 2021 and at the same time, there were certain African countries where crypto transactions have increased by up to 2,670% in 2022. This impressive growth rate is largely contributed by the low growth rates that have been reported in the previous periods.
What are some factors contributing to the impressive growth of crypto in African countries?
1/ Monetary Policy
From Senegal in the extreme west to Gabon in the center of the continent, the 14 different African countries that use the Franc of the Financial Community of Africa or CFA Franc have a history of bad relationships with their currency. In a new report by the Cointelegraph, the reason for the mistrust of the CFA Franc by its nearly 150 million daily users is due to the fact that the CFA Franc is pegged to the Euro, printed in France, and the IMF and French government control its monetary policy. Without any power to influence their monetary policy, this effectively takes away whatever hold the government of these countries have over their currency.
Living with the global economy under constant threats by different financial disasters and with no guarantee of their currency’s stability, many people from the 14 different countries see the CFA franc as colonial currency. They are fearful of the fact that the same situation might occur again.
Prior to the creation of Bitcoin, West Africans could store their money in euros, U.S. dollars or traditional stores of value: real estate and commodities. For everyday people, those options are not readily available. However, with the arrival of Bitcoin and cryptocurrencies, there is now a viable alternative for many African people.
2/ High inflation rate and devaluation of the currency
Another factor contributing to the high adoption rate of cryptocurrency in African countries is their high inflation rate. According to the global inflation rate report by Statista, the average global inflation rate is projected to be 3.12% in 2026, while in sub-Saharan Africa the average inflation rate is 6.37% in 2026. That is over 2x the difference between the average global inflation rate and sub-Saharan Africa inflation rate.
Furthermore, according to the data provided by Statista, the current inflation rate is hitting different African countries with different degrees of hardship. For example, Sudan, Zimbabwe, and Nigeria have double-digit inflation rates, while some other African countries are below that threshold.
Sudan: 41.8%
Zimbabwe: 30.7%
Nigeria: 13.3%
Egypt: 6.3%
Kenya: 5%
South Africa: 4.5%
Source: https://www.statista.com/statistics/1220801/inflation-rate-in-africa-by-country/
As inflation rates rage, devaluation of the currency follows. This situation has already been seen in recent years. According to a report by Forbes, Nigeria’s central bank has devalued Naira, the country’s currency, by roughly 35% over the past five years. Another well-known devaluation situation happened back in 1994 when the World Bank devalued the CFA Franc against the French Franc from 1:50 to 1:100. That year, West Africans woke up to realize the value of their life savings had been slashed in half, without having the power to have a say in anything. With this type of repeated situation of monetary uncertainty plus the global economic unrest, the people of Africa are looking everywhere possible to find a safe haven to preserve their wealth in whatever ways possible. For many of them, cryptocurrency was their sanctuary as other forms of assets, such as the dollar or real estate, have been getting increasingly more difficult to acquire. With cryptocurrency, the people of Africa can quickly transfer their investments across assets, which allows them to mitigate the chance of savings depreciation.
3/ Increased adoption of mobile payments
In our previous medium article, we mentioned that there is a large-scale adoption of mobile penetration in sub-Saharan Africa and the number is only going to continue to increase. With the increase in mobile penetration, the prospect of mobile money or mobile payment adoption will become part of this strong trend. According to the Global Telecoms Manufacturers Association (GSMA) report, the value of mobile transactions in Africa passed the $701bn mark in 2021 (+39% compared to 2020 — see graphic below). The number of accounts registered for mobile money services has risen by 17% to 621M. The transaction volume has also seen an impressive growth to over 36.7bn (+23% compared to 2020). The region accounts for nearly 70% of the total global amount of transactions recorded during the past year — surpassing South Asia which comes in at $156.3bn.
By analyzing this information, we can accurately tell that there is an increasing appetite for mobile transactions in sub-Saharan Africa and that people are starting to trust these new financial ecosystems. As cryptocurrency and mobile money share very similar traits, it is one of the major key factors that is driving the high adoption and transactions of cryptocurrencies.
As stated in the report by Cointelegraph:
Nourou, founder of Bitcoin Senegal, is convinced that the thousand percent growth rates for Bitcoin (BTC) adoption “will continue in coming years.”
This is the same sentiment that we at Jambo share for the future of cryptocurrencies in sub-Saharan Africa.
About Jambo
Jambo is building the Web3 super app that will educate, bank and entertain the continent. Jambo aims to pioneer the largest, most influential Web3 user acquisition portal across the continent and serve as the bridge between Africa and applications from around the world seeking to tap into the African market. The opportunity here is immense. We have a long-term vision of realizing financial prosperity for Africans.
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