Cryptocurrency Powering Nigeria’s Bureau de Change
It’s no secret that emerging markets are home to the world’s most resourceful business minds. From healthcare practitioners to energy providers, millions of people have developed innovative solutions to conduct business amid fragmented systems. International payments and trade are no expectations to this rule. The exciting news around the African Continental Free Trade Area (AFCTA) launch, the largest free trade area since the World Trade Organization’s development, has ignited endless intercontinental trade possibilities. The AFCTA will cover a market consisting of 1.2 billion people and a combined GDP of $3 trillion and signed by 54 of the 55 African Union member states. However, solving for cross border payments infrastructure is a hurdle and opportunity that will play a large role in how seamlessly trade occurs.
Crypto Anyone?
Can cryptocurrency/ decentralized technology solve this while missing institutional infrastructure?
Through cryptocurrency, users can bypass traditional bank intermediation, enabling them to quickly and cheaply transfer funds anywhere in the world. The advanced cryptographic techniques protect funds from theft and hacking, and the underlying blockchain technology filters out fraudulent or duplicate transactions. Adoption-wise, world-wide Bitcoin( BTC) is at an all-time high as 1BTC= $31,442.40, and Nigeria has been recognized as the second-largest market for BTC at volumes of $566,668,692, right after the US. Our team at Canza found that Bureau de Change agencies are an emerging group adding to that growth by utilizing the technology to keep their businesses functional.
Decentralized FX.
According to the Central Bank of Nigeria(CBN), there are 2,544 officially registered Bureau de Change in Nigeria. A Bureau De Change (BDC) is defined as an institution where businesses and individuals can place orders and broker foreign currency. Some of these orders also include the import and export of international retail and manufacturing goods.
BDCs have operated successfully, despite fluctuating FX rates and international transfer settlements that sometimes take up to 3 days to complete, straining the level of trust that they can maintain with customers. Historically some BDCs have also had to use means of personal bank account transfers between people in their personal/professional networks (some people they’ve never met before) completely built on trust (sound familiar?) to carry out transactions. However, the CBN has recently issued a series of policy changes restricting how money can be transferred internationally, creating a bottleneck for BDCs. An agency reported that his customer who needed to transfer $300k was limited to only moving $50k a month during one instance. His customer suggested they utilize cryptocurrency to carry out the transaction, and he has been a fan ever since.
Fast, Effective, Secure
BCDs have reported that with cryptocurrency, primarily Bitcoin, they can do as much business as they want. The nature of the fast and secure solution has strengthened their relationships with their international customers while saving them time and money. With traditional banking, transferring $10k aboard can cost a BDC up to $105 and take up to 3 days to settle, but with cryptocurrency, that same transaction can cost $2 depending on the platform and be settled within minutes.
Cryptocurrency has a long way to go before becoming the silver bullet to make FX seamless, mainly due to increased global adoption. However, the market opportunity for it as a transactional tool remains extensive and exciting.
About SaukiBit
SaukiBit creates APIs and financial service tools tailored to local integration with existing financial technology products. Our newest product Canza will launch Q1 of 2021, focused on powering agent banking and services.
We’d love to hear from you. If you are interested in becoming a member of our BDC/ FX Agent community, sign up for early access here.
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