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TIM MCDONNELL/BLOOMBERG
THE BOTTOM LINE InNigeria, a growing number of informal
networks of professional Bitcoin traders are doing the work of
verifying transactions, sometimes in person.
3 million people in Nigeria—where the per capita
annual income is less than $3,000—of $50 million.
It had also convinced many of them that, the
scam notwithstanding, Bitcoin was the future. “It
was MMM that made Nigerians understand how
Bitcoin worked,” says Lucky Uwakwe, co-founder
of Blockchain Solutions Ltd., a cryptocurrency con-
sulting firm in Lagos. Today, Nigerians are trad-
ing about $4.7 million in Bitcoin a week, Uwakwe
says, up from about $300,000 per week a year
ago. That’s No. 23 globally, according to researcher
CryptoCompare—far below the more than $1 bil-
lion traded daily in U.S. dollars or Japanese yen,
but comparable with the volume of activity in
Chinese yuan or Indian rupees. “The growth has
been crazy,” says David Ajala, who runs NairaEx,
one of about a dozen digital currency exchanges
in Nigeria. “It took us two years to get 10,000 cus-
tomers. Within the last year, we’ve added 90,000.”
The scams have kept pace. Phony traders have
flooded Nigeria’s cryptocurrency exchanges, mes-
saging apps, and even the streets of Lagos and
other cities, promising people fast money and dis-
appearing once they’ve taken theirs. “A lot of peo-
ple have had their fingers burned,” says Adeolu
Fadele, founder of the Cryptographic Development
Initiative of Nigeria, a group that aims to educate
regulators and the public about digital currency.
The scams follow a pattern familiar to anyone
who’s ever received a message from a supposedly
beleaguered Nigerian prince: The target is asked
to wire over naira, the local currency, in exchange
for Bitcoin. In some cases the scammer uses the
name and photo of a real dealer and creates a trad-
ing profile on a local exchange that’s good enough
to pass a cursory background check, a technique
known as cloning. Others will make an offer not of
Bitcoin, but of “billion coin” or some other non-
existent cryptocurrency. “Everybody I know has
been scammed in one way or another,” says Bashir
Aminu, a digital-security expert and Bitcoin enthu-
siast in Lagos.
So Nigeria, unlike other Bitcoin hubs, has begun
to develop informal groups of traders who take an
old-school approach to verifying transactions. After
several friends of Aminu’s lost thousands of dollars
to scammers between them, they set up an infor-
mal exchange on the messaging app Telegram,
trading among themselves. When other friends
sought to join the group, Aminu would review
their identification and banking documents—com-
paring passports and papers with the faces in front
of him. Sometimes he’d even act as a trusted bro-
ker, holding a buyer’s money in escrow until the
seller came through with the Bitcoin transfer.
Over the past year, he says, his group has grown
to almost 800 members. There are dozens of sim-
ilar networks, Aminu says, with varying degrees
of security procedures. Some arrange face-to-face
meetings in homes, the backs of small shops, and
other private places, where a buyer hands over
hard cash and watches the seller make the Bitcoin
transfer on a smartphone.
This sort of facilitator is essentially a digital
aboki, the kind of black-market money-changer
who lurks outside high-end Nigerian hotels to
swap plastic sacks full of weather-beaten naira
for stacks of $100 bills and euros. As these infor-
mal Bitcoin-centric networks grow and multiply,
Aminu says, they’re increasingly populated by
people who trade digital currency as a full-time
occupation. Because of all this informal trading,
the size of Nigeria’s market is probably much big-
ger than what the public exchanges report, says
Uwakwe, the consultant.
Aminu says the occasional scammer still sneaks
into his Telegram network, and he recently booted
more than 100 people he deemed untrustworthy.
For many, the potential profit is too good to pass
up, says “Ambassador” Smart Oluwadola, a crypto-
currency peddler in Kano, a desert city in the
north. In August a friend persuaded Oluwadola to
ditch a job hawking health supplements for a sus-
piciously pyramidal Philippine “business club” and
buy a couple hundred dollars’ worth of Bitcoin.
Now he’s an evangelist, with thousands of dollars’
worth, a local radio ad urging others to buy Bitcoin,
and a series of investing seminars at a local hotel.
“If you don’t take a risk, you can’t get anything,” he
says. “And if it’s going to be the future of currency,
then you better start now.” —Tim McDonnell
Oluwadola, a
cryptocurrency peddler
in the northern desert
city of Kano, sits in the
hotel lobby where he
often does business
TECHNOLOGY Bloomberg Businessweek January 29, 2018
