There is growing controversy surrounding gift cards trading in Nigeria. The influx of innovative platforms like cryptocurrency exchanges has enabled easier and more flexible ways for Nigerian residents to exchange gift cards for either Bitcoin, any other cryptocurrency or fiat. Many young Nigerians have adopted this model of trading as a source of significant income. However, the pertinent question remains, how do Nigerians get so many gift cards to trade such volumes as recorded on the exchanges?
The Dark Side of Gift Card Trading
Gift card trading has come with a lot of dispute and controversy in the Nigerian cryptocurrency space. On some of the peer-to-peer trading platforms in Nigeria, there are numerous lingering trading disputes. Many traders’ accounts get suspended and their funds frozen, especially when allegations to defraud are reported. Several complaints like this abound on the traders’ forums of these platforms.
The puzzle here is that liquidating a gift card, or trading it implies that you receive money that is less than the actual value of the card. This leaves one to wonder if anyone will deliberately purchase a gift card, only to resell at a loss. Perhaps, there are business models surrounding this practice that only a closer look can clarify.
According to Rume Ophi, Partner at Vorem Nigeria, the gift cards business in relation to trading is a dark business. He is of the opinion that the majority of those participating in such trade in Nigeria especially are connected with scammers. One of the reasons why he believes so is that such items aren’t sourced locally, as there are no such platforms like Walmart that offer them. Therefore, picking up gift cards trading as a venture can’t be very straightforward in his opinion.
How Do Nigerians Acquire Gift Cards?
Ray Youssef, CEO and co-founder at Paxful shares a contrary view from Ophi. He notes that there are several methods by which Nigerians can legitimately acquire gift cards. Youssef’s opinion is informed by the activity of traders on her peer-to-peer exchange, Paxful. He says;
There are several methods of acquiring gift cards in Nigeria. One is that many Nigerians have virtual jobs and get paid in gift cards. There are also gift card resellers on social platforms and forums. And prior to that, they could purchase it directly from the US with either a Debit or Credit Card. The most interesting use case is that there are immigrants who are using gift cards and Bitcoin to transfer value back to their home country.
Perhaps, the points noted above may be justifiable, considering the prevailing conditions among Nigerians resident in the country. The high rate of unemployment implies that a lot of young people would seek remote jobs offshore. Another interesting fact is the high rate of migration, and how those who have travelled out in search of greener pastures always make efforts to support their family members and friends that they left behind. It is almost a cultural issue for migrants to send money back home in this part of the world. Among several channels, gift cards, as Youssef notes could be a viable one.
How Nigerians Are Benefitting From Gift Card Trading
As noted at the beginning of this article, gift card trading is becoming more and more popular and Youssef tells Coinstituency why he thinks this is so. He explains that for some countries, this is the only way people can move their wealth. It is quick and easy to purchase and at times holds a more stable value than its national currency. He also notes that in Nigeria, due to the Naira’s volatility & capital controls enforced by the Central Bank, it is becoming difficult to access Bitcoin with Naira through other more traditional payment methods. Therefore, more platforms, like Paxful, who have robust security measures, make users feel safe while trading with gift cards.
A key factor that Youssef identifies that has attracted more people towards gift card trading is the associated incentives in addition to the points mentioned above. “We have heard several stories from our community about this, says Youssef. “It can create an arbitrage opportunity, from the difference in USD/NGN rates, that in turn, can create wealth.” As mentioned previously, he explains that there are people who use gift cards for remittance, and even though they may take a loss on the value of their gift card, it still delivers more Naira to their families back home than any other traditional remittance system.
Who Defines The Gift Card Trading Ecosystem?
While Youssef acknowledges the rampant disputes among gift card traders, he attributes such cases on Paxful exchange as a result of the platform’s proactive measures of preventing fraud. “Attempting to trade with used gift cards and reselling gift cards are against our TOS.” However, he disagrees with the opinion that most of the gift cards that are traded in the Nigerian crypto space are stolen, noting that exchanges like Paxful have put in controls to ensure the user is the owner of the gift card they are trading and will continue to enhance these and other controls.
In concluding, while Youssef does not totally discard the existence of scammers in the gift card trading ecosystem, he is of the opinion that they do not define the entirety of how people use gift cards and Bitcoin to overcome restraints from traditional financial systems.