The Nigerian and African blockchain and cryptocurrency market appears to be dominated by foreign projects. Few as they may be, these imported solutions are claiming the lion share of the Nigerian market. Exchanges like Binance, Luno, Paxful and Remitano are having huge patronage from Nigerians while most of the indigenous platforms, despite having been around for a few years already, are yet to really take-off. This begs for a number of questions within the local blockchain community.
To some people, the Nigerian blockchain and cryptocurrency ecosystem has come a long way. To many others, the industry has not really kicked off yet. This has nothing to do with the potential market size, which is universally agreed to be huge and largely untapped. This share market size alone confers on Nigeria the title of a viable market for projects with appropriate navigational tools.
Already, we are seeing the influx of some major industry players, especially exchanges as mentioned above. A lot of people will suggest that they are here for the profit that they are making from the market. However, you cannot deny that they are also offering essential value to the community. While we focus on the value that they offer, and the consequent profit they derive from the market, the pertinent question still resonates – Why are imported solutions dominating the Nigerian and African blockchain and cryptocurrency environment?
Unpreparedness And Short-Term Thinking
Offering his opinion to Coinstituency on this subject, Victor Ugochukwu, Blockchain Researcher at Cryptodose described the situation as “a double-headed monster”. The two key aspects that he noted include;
- The lack of sound STEM education to build a solid tech mindset into the citizens.
- A hard economy which has resulted in poor purchasing power ultimately leading to short-term thinking.
According to Ugochukwu, understandably, the West and Asia leads in terms of tech. Looking even deeper, their dominance stems from deep investment in STEM – Science, Technology, Engineering and Mathematics. He explains that even if anyone decides to adjust their sextant a little bit off of blockchain tech and its most popular application: cryptocurrency, and tune it to Mars, the race is on for Mars colonization while back in Africa the people barely know what is even going on. “I guess we are still grappling with bad roads and potable water to drink for survival, says Ugochuckwu. “How then can we begin to think of dominating newer technologies like the blockchain or colonizing Mars?”
There Is The Need To Get More Involved
The second key element for this extent of backwardness as identified by Ugochukwu is the approach of short term thinking. He notes that in Nigeria and Africa at large, the people barely participate in the crypto space if not just to buy and sell. And of course, to achieve this, a solid platform is needed to help their trade. That then means the majority will easily tilt to dominant and liquid platforms like Binance, Paxful etc. rather than the emerging indigenous platforms.
Ugochukwu continues by explaining that there are obviously more that can be done in the blockchain space beyond just buying and selling. He notes that Ethereum is still facing scaling problems, and Layer 2 solutions like Matic have been developed by Indians. This particular development has been enjoying huge hype since it went on the mainnet. To drive his point home, Ugochukwu emphasized that such regions are solving pertinent issues with their technological know-how. This he also identified to be giving them the advantage of mileage. “Do you think we can create a dominant solution tomorrow to dislodge them easily? I think not”.
Ugochukwu concludes by giving another example;
Look at DeFi, it’s been booming recently. But there is obviously a lot more improvement needed like intuitive and noncustodial solutions that can help users access and unlock liquidity from protocols. People are seeing this opportunity and cashing in to develop and meet these needs. This easily explains the success of Uniswap. But not Africa, how would we even participate in these kinds of development when we are by design constrained by our environment to think mostly short-term like “Where is the next ICO where I can make x10 my money and probably blow it away on BitMEX while margin trading?
Absence of Consumer Confidence
In every market, one essential element is consumer confidence. As a matter of fact, it is only natural for consumers to gravitate towards a solution where they feel more secure. Perhaps this could be one of the reasons why many crypto users especially prefer the more established platforms than the emerging indigenous ones.
A contributor who has chosen to remain anonymous tells Coinstituency that most crypto users look out for scalable solutions that can truly satisfy their wants. For trading exchanges, he notes that the deal-breaker falls on huge capital, which is a basic requirement to maintain liquidity.
Such an opinion would make anyone wonder why and how these imported solutions can achieve or access such capital, while their indigenous counterparts are struggling. How does this become a geographical issue? It is almost obvious that while outsiders see the huge market and make adequate preparation to engage, the locals either do not see the same potential. When they do, they are either incapable or unwilling to raise such “huge capital” to become appealing to their own people.
Proper Inward Assessment
Co-founder at VaultBridge, and Executive member of Nigeria Blockchain Association, Arinze John explains societal factors and environmental limitations have contributed to stunted growth, or outrightly stifled local grown businesses in Africa. However, he chooses not to dwell on the “blame game”, which according to him, connotes an attribute of the emotional and sentimental psyche of an average African.
John would rather look inwards as to what he describes as a critical assessment of the issue at hand. He notes that it is important we ask the honest questions about the competence of the owners and managers of these home grown African projects or businesses. Here are some of the pressing questions and issues raised by John:
- Do these managers have basic and fundamental knowledge that equips them to confront the rough terrains of the business world, acknowledging the fact that classroom knowledge from our school system will not take you anywhere in the competitive ground of the business world?
- What are their levels of exposure to information as regards to industry best practices?
- What are their levels of leadership experience business-wise, which will actually translate into “Prudent Business Management” to build sustainable businesses that can stand the test of time?
- There is a saying that “Readers are Leaders”. What are they reading? National Dailies, or Business related Journals that can build them up to make informed decisions at all times?
- Can they teach, and be teachable also? Are they open to learn from others? Are they open for criticism and also for Mentorship?
- Do they have provisions as a matter of policy for capacity building and research among the staff strength. Either individually or collectively?
- Also, have they carried out “SWOT Analysis” of their business and products before moving to the implementation phase?
- Have they dealt with the issue of “Emotional Intelligence”, especially in terms of separating pleasure and business; and separating family and business?
John believes that finding honest answers to these fundamental questions and many more, will encourage positive changes in the ugly trend of rise and fall that has beclouded many African Startups so far.
Transparency, Psychology and Socio-Cultural Factors
On this same issue, the Lead Partner at Infusion Lawyers and General Secretary of SiBAN, who is also the Community Lead at BuidLBlocks, Senator Ihenyen is of the opinion that there are several factors behind this inclination towards foreign products. First, Ihenyen identifies an undeniable psychological and socio-cultural factor. He notes that it is no longer news that Nigerians, like most Africans, typically prefer foreign products to local products. He explains that Nigeria’s Blockchain and crypto market cannot be completely separated from Nigeria’s larger societal fabric.
According to Ihenyen, this psychological inclination is not just strong, but very strong. Across most industries, from automobiles to health, fashion to sports, many Nigerians would choose a foreign product over a local product any day, regardless of what the makers of local products claim about the superior quality of their own products. In a way, this is a perception issue.
Apart from the psychological and socio-cultural factor, Ihenyen also points out the issue of superior quality. He notes that many Nigerians trust foreign products more than local products because they believe, rightly or wrongly, that these foreign products meet global standards compared to their local counterparts. Therefore, in the blockchain and crypto space, more Nigerians tend to believe that these foreign products are offered by credible global brands that they can trust to some considerable extent compared to their local counterparts. On this, he notes that we cannot blame such Nigerians, considering the glaring evidence.
Continuing, Ihenyen explains that achieving credibility and trust in any market demands a high degree of consistency, and consistency demands resources. Resources in this case meaning people, systems, and money.
I find that most local brands struggle with either accessing these resources or properly applying such resources to achieve consistency, says Ihenyen.
The third factor considered by Ihenyen, particularly in the blockchain & crypto space where anonymity is a virtue and not a vice is that most users want to see the face or faces behind the product. On this, he notes that with only a few exceptions, foreign brands in the space today do that better. From founder and co-founder to legal and finance team, most times, you are able to see the team as well as their profiles. This convinces the user that the project is not a one-man project that could wrap up overnight. Trust is boosted.
In lending his voice on how to change the ongoing narrative and become more competitive, Ihenyen thinks that indigenous blockchain & crypto platforms need to improve on transparency.
A good number of local blockchain & crypto platforms lack transparency in business. By lacking transparency, I mean that their business processes are opaque, which breeds distrust and suspicion. From their management structure to their funding structure, everything is in the dark. Operations are often built around the founder/CEO. If such a founder/CEO is not level-headed, it hurts the company. Apart from lack of transparency, corporate governance is often lacking as well. Finding local blockchain & crypto platforms with strong corporate governance is rare in the space. It is like running a business and expecting potential customers to patronize you while their eyes are blind. It doesn’t work that way. Without corporate governance, smart people will never trust you with their money.
Ihenyen concludes by explaining that many local blockchain & crypto platforms do not take branding seriously. The manner in which some founders/CEOs or project managers and ambassadors lead, manage, and project their local products is not great for user adoption. This hurts trust and reliability. “Our local entrepreneurs must learn to build, maintain, and continually invest in branding. No brand; no business.”
The Hard Truth Must Be Told
The CEO of Digital Abundance, and 2020 recipient of the Crypto Influencer Award by Binance for Africa and the Middle East, Chris Ani also shared his opinion on this subject with Coinstituency.
According to Ani, no matter how the clamour for us to support made in Nigerian products or services, Nigerians will always be inclined to foreign products because of two valid reasons.
- Trust: Ani observes that it is true that Nigerians are creative and highly intellectual, but as Nigerians, it is understood that indigenous creativity and innovation are affected by the immediate environment. “Over time, we have seen how many made in Nigerian goods and services fall below international standards, says Ani. “From fashion to electronic devices to drugs. And the Nigerian cryptocurrency and blockchain space is not left out in this culture of distrust.
- Inexperience: He also notes that it is difficult for users to trust the Nigerian blockchain and cryptocurrency industry when they know that founders of cryptocurrency companies in Nigeria are still inexperienced, especially when compared to their counterparts abroad.
In his explanation, Ani elaborates that Bitcoin was introduced in 2009, but it took Nigerians about 8 years to fully recognize and accept Bitcoin as a financial revolution. He notes that it suffices to say that the blockchain and cryptocurrency industry in Nigeria is still in its infancy. Nigerian founders cannot compare themselves with the likes of Barry Silbert, who started investing in Bitcoin since 2012 and backs Luno, or Changpeng Zhao, the founder of Binance, who worked for cryptocurrency projects like Blockchain.info and OKCoin in 2013 before leaving in 2017 to found Binance.
When it comes to the blockchain and cryptocurrency industry, we still have a lot to learn. The only niches we have done well so far are crypto education, media, and P2P exchanges, says Ani.
Difference In Approach and Capacity
Ani also emphasized on some of the differences in terms of approach between imported and local blockchain solutions. He notes that there are several qualities that imported projects have which distinguish them from indigenous projects. For instance, these companies have high liquidity. Companies like Binance, Luno, and Remitano generate cash above their liabilities. This he says gives them the capacity to withstand certain financial challenges. One typical example that Ani pointed out is that in 2019, hackers withdrew 7,000 Bitcoins worth about $40 million from Binance in a single transaction, yet Binance is still standing, still the world’s No. 1 exchange. Binance users didn’t lose their funds despite the hack. Many Nigerian exchanges wouldn’t have survived that kind of huge attack.
Also according to him, the reason why these international crypto companies are able to have high liquidity is because of the sufficient funding they receive from venture capitalists and angel investors. And this leads us to another quality, scalability.
Founders of these companies start up these companies with the intention of scaling up later. They know there would come a time when investors would have to buy into the company and its ownership. Thus, these companies have the kind of infrastructure and funding not seen in Nigerian companies.
Ani is of the belief that indigenous companies in Nigeria are not ready to scale up. He notes the lack of a cooperative spirit to be responsible for this. He further explains that there have been projects in Nigeria where co-founders have messed up and the companies packed up with people’s money. For this reason, new founders are sceptical about getting co-founders and investors to run their companies with them. And a sole proprietor can only get to a particular limit without scalability.
Where Is The Patriotism?
Another key issue that Ani points out is that Nigerians are not patriotic enough to invest in indigenous products. “We have wealthy people with the capacity to fund innovative crypto projects, but are they ready to do that?”
In order to fix the situation, Ani insists that Nigerians must begin by telling themselves the honest truth.
The only thing we have is passion. We don’t have the infrastructure, human resources, and technical know-how to compete favorably with international blockchain platforms.
According to him, this implies that there is a lot of learning and relearning to do. There is no need to rush, and Nigerians need to play their cards right and grow their financial and technical infrastructure.
We must give ourselves time to grow. There is nothing wrong in starting small; starting small only becomes a problem when you shove aside your inadequacies and try to place yourself above your capacity. What we need to do is to ensure we learn and gain enough experience. We also need to seek the right resources—human, material, and financial—in order to expand our capacity. This duty is not placed on Nigerian blockchain and cryptocurrency founders alone, but also on the government. It is not breaking news that governmental policies do not make Nigeria a favourable soil for foreign investments. And as long as we keep driving foreign investors, and as long as our local investors are not ready to invest, cryptocurrency companies in Nigeria will always remain below par.
Iyke Aru is a seasoned author and educator in the blockchain and cryptocurrency industry. He has been in the business of crypto content writing for many years with thousands of his articles across several platforms on the internet. Iyke is based in Nigeria where he stands out as one of the most informed and credible figures in the cryptocurrency industry. Outside blockchain and crypto, you will most likely catch Iyke playing or discussing football with friends and family.