On the first week of June, 2018, the volume of transactions in bitcoin rose to more than 1.5 billion (worth N1.4 billion) from 1.3 billion traded the previous week in Nigeria, according to LocalBitcoins. Majority of those transactions were made by individual investors through local exchanges to companies outside Nigeria that accept virtual currencies. Nigerian businesses largely do not accept payments in cryptocurrencies because of the regulatory landscape. Others are either not aware of how to leverage the opportunities and risks in cryptocurrencies or they are too afraid to venture.
Cryptocurrency apathy is not a Nigerian problem, globally small and medium scale businesses hesitate to take the plunge. A recent report from card machine provider Paymentsense showed that only one-in-ten small business owners (13%) said they already take cryptocurrency payments. A quarter of them said cryptocurrencies will never hit mainstream – legally accepted. A major sore point is the red flags many regulators continue to wave.
However, blockchain technology which powers cryptocurrencies is already being tested by many governments. It is only a matter of time before those countries find ways to play in the market that will expose them to less financial risk. While it may take a longer time to see cryptos go mainstream, there is nothing stopping a small business from taking advantage of the market. Small businesses can by-pass the complex web of bank-to-bank transfer using blockchain which is quicker and cost effective. Blockchain has significant computational power that allows users to transfer users to transfer cryptocurrency in just a few minutes. Bitcoin miners take roughly 10 minutes to verify and facilitate a transaction from one person’s wallet to another. Cryptocurrencies like Ethereum and Litecoin verify transactions in as little as 20 seconds.
Cryptocurrencies use decentralised ledgers and act as peer-to-peer digital currency which means entrepreneurs do not have to pay anyone to facilitate the transactions. They can either save more money or pass on their savings to the customers with lower prices. Blockchain’s cost efficiency can give small businesses the advantage over big players who rely on time-proven but slow and expensive payment transfer systems and financial institutions. It is important to note however that merchant wallets charge a flat monthly fee for their services. Cryptocurrencies also reduces the barriers placed by third parties such as banks as it does not tolerate them. An expert explains this way “small businesses can enjoy the benefits of cutting out middlemen – higher operation speed, fewer mistakes, and massive reduction in product and service costs – thanks to blockchain-powered strong smart contracts. Strong smart contracts ensure performance without recourse to the courts.” All the business needs is a wallet downloaded from a credible cryptocurrency exchange. Many of them like Luno are already operating in the country.