…as more Nigerians flock to virtual money
By AYOOLA OLAOLUWA
In spite of warnings from regulatory bodies and bitter experience of millions of Nigerians with questionable financial schemes, many Nigerians, particularly the youths, are daily flocking to cryptocurrency, Business Hallmark findings can reveal.
Though, cryptocurrency is not illegal in the country, the Nigerian Securities and Exchange Commission (SEC) and the Central Bank of Nigeria (CBN) have warned Nigerians against investing in the virtual currency, warning that it is risky and sometimes fraudulent.
According to the CBN, cryptocurrency is not a legal tender in the country. The apex bank described it as a volatile currency because it is operated mostly without regulations in place, thereby, creating loopholes for users to be defrauded.
Many experts have also described cryptocurrency as a variation of a Ponzi scheme. They argued that crypto assets are a high-risk investment, as economic bubbles of different stock assets often take on a form of a Ponzi scheme, blowing the real value out of proportion.
Many citizens, it would be recalled, had lost their hard-earned money to fraudulent pyramid schemes like Mavrodi Mundial Moneybox (MMM), Pennywise and opaque cryptocurrency schemes, with some victims vowing to never get involved again.
However, checks revealed that several cryptocurrency schemes like Loom, Basic Attention Token (BAT), Monero (XMR), Bitcoin Cash (BCH), IOTA (MIOTA), Stellar (XLM), Bitsane and PinKard, among several others, are making wave in the country, with daredevil and mostly uninformed Nigerians taking their chances with the schemes.
BH checks revealed that the crypto schemes have several local platforms that support purchases and sales of digital coins with the naira. They include Nairaex, which is the largest local crypto exchange supporting several payment methods to buy and sell BTC including bank transfers, and bitcoin remittance platform Bitpesa.
Bitpesa works with M-Pesa, a popular mobile phone-based money transfer service initially launched in Kenya and Tanzania. It was observed that Nigerians use Bitpesa to buy bitcoin with their debit cards. They also patronise Wallet.ng, Busha, Tradefada, Bitfxt and several others.q
During the investigation, it was observed that many Nigerians now see virtual currency trading as money doubling opportunities and are daily flocking to it.
According to a report of the Chartered Institute of Bankers of Nigeria (CIBN) obtained by BH, Nigeria is one of the African countries with the highest number of new users of Bitcoin. The CIBN said 41% of new users in bitcoins were reportedly from Nigeria, Ghana and South Africa.
CIBN’s revelation was corroborated by Google. According the world biggest search engine firm, searches for bitcoin on its platform have increased to about half of those registered in last year.
“There’s one country that sticks out as a benchmark for the indicator. Nigeria has consistently topped the chart in the past 12 months. Only a couple of other African nations, Ghana and South Africa, come close,” Google stated.
According to a report compiled by Coin Dance, an online platform that provides statistics and services on Bitcoin, after a decrease last year, trading volumes on the peer-to-peer exchange Localbitcoins are picking up again, reaching over N600 million a week or $1.65 million. The report suggests that cryptocurrency is gaining strength in Nigeria.
Some Nigerians who spoke to our Correspondent on their involvement with cryptocurrency said they were seeking ways to make quick and extra profits as the nation’s economy continues to weaken under the administration of President Muhammadu Buhari.
“I am a teacher with a private school in Lagos and I collect N10,000 monthly as salary. The proprietor just promised to review it to N15,000 in January 2021.
“I was introduced to the scheme (Pinkard) four months ago by a colleague of mine in the school. Though I was a bit skeptical when she first brought the idea, but because of my dire financial situation and what she told me I would benefit, I quickly jumped on board.
“I bought a coin each for myself and my daughter at the rate of N2,500 apiece, totaling N5,000. They gave us two ATM like cards that we can use to shop for goods valued at N17,000 (N8,500 on each card).
“I ‘m eagerly waiting for the time to go and collect the goods”, said the excited Mrs. Grace Osaretin.
While Bitcoin is the most prominent in Nigeria among the more informed, many uneducated and ill-informed Nigerians are flocking to less recognised platforms, thereby putting their hard earned savings at risk.
Findings revealed that most Nigerians dealing in the business of virtual currency are in harm way as scammers are daily employing cryptocurrencies to perform Ponzi schemes
Since many Nigerians own android phones, they are easy targets for vendors of the schemes who access them through social media platforms like WhatsApp Yahoo Messanger and Facebook.
For example, a potential client is invited to join a WhatsApp group chat, usually by a friend, a colleague at work or relative. Then he is asked to invest amounts ranging from N2,500, to N50,000 and above with a promise he will make back more than five times the amount when he recruit new entrants.
Another way they entice subscribers is through the promise of monthly vouchers which those that signed in could use to purchase goods at designated stores.
On how it works, a vendor with Pinkard who did not want his identity disclosed, said that the value of a voucher depends on the product purchased by a subscriber.
“For example, if you invest just N2,500 you get a voucher worth N8,500 every month to purchase goods of your choice at designated stores.
“If you invest N5,000 you get double of that. That how it works”, the vendor stated.
When he was asked to explain how an investment of just N2,500 will continue to return N8,500 to an investor every month for several years, he confessed that he was just a marketer and didn’t know much.
“What we were told was that the coin keeps appreciating every day and that as long as it appreciates, everyone is a winner.
“How it works is that returns are generated by speculating the price movement of cryptocurrencies. Also, we get profit from buying and selling different coins via exchanges”.
He however declined to state what will happen in the event that the coin purchased depreciates and lose value.
A survey undertaken by BH showed that five out of every 10 Nigerian youths within the age of 25 and 40 have at one point or the other indulged in the business of cryptocurrency. The number is, however lower among adults between the ages of 41 to 65, with only two agreeing to have been involved in the trade.
Billions of dollars have been lost because of the ignorance of people who are new to the cryptocurrency market. According to Wikipedia, losses from cryptocurrency crime surged to $4.52 billion in 2019. And Nigeria is not immune to these crypto scammers.
Fake cryptocurrency promoters in the country now capitalize on the 2017 and 2019 Bull runs, promising investors huge returns within a short period. And owing to greed, more Nigerians are falling victims and in the process losing money to fraudsters.
A student of University of Port Harcourt, (UNIPORT), Tomisin Aboderin, said he lost the $2,500 he invested in Nigerian Calabar Company.
“How I wish I didn’t listen to the advice of my mates who urged me to subscribe to the company. But I was enticed by the mouth offering return. I was told that if I invest an amount, I will get 2% interest daily, 14% weekly and 50% monthly.
“I was expecting to get $1250 monthly before the scheme crashed. Now my money is gone”, Aboderin lamented.
Another Nigerian who lost his investment to a fraudulent cryptocurrency scheme, Miss Blessing Anyawu, a hairdresser in Ogba, Lagos, said she lost over $1000 she invested in Bitsane, owned by an Ireland based company, Irish Crypto Company.
“I successful invested in the scheme after going through a process. But when it was time for me to cash out, I found out the whole scheme was a fraud.
“I needed money urgently. So I tried my XRP out to bitcoin for me to by goods which I could exchange for cash. However, I was shocked when I got a ‘temporarily disabled’ notice.
“I thought it was a network error, and kept trying. After sometime, I got a message that I could no longer access the Bitsane site. It has been over three months now and the site has still not come up. That was how I lost my money”, said Anyawu.
An economist, Dr. Toba Oyetolu, advised Nigerians against investing their money in virtual currency.
“It’s a pyramid scheme. You only make money based on people who enter after you. It has no real utility in the world. They’ve been trying to create a utility for it for years now. It’s a solution in search of a problem and it still hasn’t found a problem to solve,” he said.
Another respondent, Bola Oyenuga, advised Nigerians against putting their money where there is no guarantee of returns.
“I don’t think you go into it thinking that you’re going to become a millionaire as a result of it. You should only go into it with the understanding that the market is purely speculative and that you can lose all your investments.
“I will even advise every investor to make thorough inquiry or seek the services of professionals before taking certain investment decisions. In most cases, Nigerians don’t do due diligence and they usually get their fingers burnt’, he said.
Meanwhile, as Nigerians continue to embrace cryptocurrency and face the prospect of losing money, regulatory authorities in the country are working on laws to protect investors against fraud.
The Nigerian Security and Exchange Commission said it was developing a regulatory framework for the digital currency sector, providing crypto education for law enforcement agencies, which would go way in protecting investors.
Apart from embarking on awareness programmes to sensitive Nigerians to the risks involved in crypto trading, SEC said it had also clamped down on several Ponzi scheme operators and in some cases refunded the victims.