With the rising popularity of Bitcoin, there’s a growing number of Nigerians who are investing in Bitcoin to make money. Bitcoin is a highly volatile asset that is subject to large and quick price swings in the short-term, presenting an opportunity for large returns while also posing tremendous risks to investors. Cryptocurrency investment in Nigeria comes in many forms as we shall see in this article.
Bitcoin Do’s and Don’ts
- Trade or invest only in bitcoin as a long term investment. Altcoins are copy-cats, scams or simply nonsensical, avoid them.
- Don’t trade or invest into bitcoin more than you can afford or willing to lose. Generally, it is advisable not to invest more than 10% of your funds into bitcoin. We don’t recommend day-trading or betting on crypto.
- Only use non-custodial wallets to store your bitcoin. Don’t leave your bitcoin on a crypto exchange after buying. Use cold wallet such as Trezor for long term investment. Always have safe backups for when your wallet gets lost.
Is Cryptocurrency Legal in Nigeria?
The buying and selling of cryptocurrencies in Nigeria is a bit complicated. You can buy and trade cryptocurrency as you like but you cannot do it with your bank account. In February 2021, the Central Bank of Nigeria banned all commercial banks from carrying out crypto transactions. This however does not make cryptocurrency illegal in Nigeria. You can buy and trade crypto through crypto exchanges and crypto brokers.
Like most investments, Bitcoin is a risky investment. As such, it is best to access your risk appetite before putting your money towards this volatile asset class. We advise you to invest 5% or less of your funds into Bitcoin.
The State of Bitcoin/Cryptocurrency Industry in Nigeria
Bitcoin and cryptocurrency adoption in Nigeria is on the rise, making Nigeria the largest Bitcoin market in Africa. This has been attributed to Nigeria’s failing national fiat currency (the Naira) and the resourcefulness and proactivity of the country’s young and tech-savvy population. When it comes to crypto adoption globally, Nigeria is the top sixth country (according to Chainanalysis’ global crypto adoption index).
How to Invest in Bitcoin in Nigeria (Cryptocurrency investment in Nigeria)
The volatility of Bitcoin prices makes Bitcoin a risky investment. If you are a conservative investor, investing in Bitcoin is a poor choice of investment. However, if you are interested in assuming greater risk, this can be a good investment choice. There are several ways to invest in Bitcoin in Nigeria:
- Buy and “hodl”
- Dollar Cost Averaging (DCA) in Bitcoin
- Buy shares in a company that deals in Bitcoin or has exposure to Bitcoin through partnerships or investments
- Invest in a cryptocurrency-focused funds
- Bitcoin mining
- Bitcoin interest accounts
The Buy and Hold Strategy (Hodl)
The most common way to invest in Bitcoin is to buy it directly and “hodl” to gain better returns in the future. Although Bitcoin is volatile in the short-term, it generally appreciates in the long-term. Hodling is probably the most popular long-term crypto investment strategy. You can purchase Bitcoin on your own on a crypto exchange or use the services of a broker. Read our comprehensive article on how to buy cryptocurrency in Nigeria.
Hodl a Bitcoin and cryptocurrency investing strategy in which you buy Bitcoin or other cryptocurrency and hold it in your crypto wallet for a relatively long period of time. Investors will be required to weather the ups and downs of Bitcoin price fluctuations without selling.
Dollar-Cost Averaging (DCA) in Bitcoin
Dollar-cost averaging (DCA) is a cryptocurrency investing strategy where you invest fixed amounts of your money into crypto at regular intervals. It is an investment strategy that helps you reduce your average cost per share when you buy shares at a time when the cost is low. Moreover, you don’t need to have a lot of money to participate in DCA investment strategy. DCA is a long-term investment strategy used to invest and build wealth. Bitnob is a Nigerian exchange that provides for Dollar cost averaging bitcoin in Nigeria. Other platforms where you can buy Bitcoin using DCA strategy are Remitano, and Luno.
Investing by Buying Bitcoin Stock
Another way to invest in Bitcoin in Nigeria is to buy shares in a company that deals in cryptocurrencies including Bitcoin. These companies can be crypto exchanges, cryptocurrency mining companies, mining hardware makers, or any other company that deals with crypto. One of such companies is Coinbase. However, you will find out that most companies are US companies and it may not be easy to invest in them from Nigeria. Trove is one of Nigeria’s investment app that you can use to invest in US companies. To buy shares from companies that deal with cryptocurrency, use the search feature in the app to look for these companies and place your orders.
Invest in Cryptocurrency-focused Funds
Another great investment option is to invest in a cryptocurrency-focused fund (particularly Bitcoin) such as ETFs (Specialized exchange-traded funds). You can choose Exchange-traded funds (ETFs) such as index funds and futures funds that are available for cryptocurrencies such as Bitcoin. Unfortunately, options for cryptocurrency ETFs around the world are limited at the moment. In addition, you need to take time to educate yourself about this type of investment. Alternatively, you can use the service of licensed brokers.
Crypto loans are becoming quite popular. In addition to be able to get a crypto backed loan by using your Bitcoin as collateral, you can also lend out crypto and earn interest. KuCoin is one of cryptocurrency exchanges that allow you to lend out your crypto holdings and earn interest in return.
Bitcoin Interest Accounts
With this strategy, you buy Bitcoin or any other cryptocurrency and then keep it in a Bitcoin interest account to generate a financial return over a given time frame. Unlike hodling (discussed above), this strategy allows you to deposit your crypto into a third-party crypto wallet for a specified period of time and earn interest.
There are many cryptocurrency exchanges that can offer you crypto interest account. The best exchanges include BlockFi, Binance, Luno, and Crypto.com. Crypto interest given depends on the platform’s policy. BlockFi, for instance, offers interest starting from 8% while with Crypto.com, you can earn up to 14.5%.
Bitcoin mining is also another way to make money through Bitcoin. It is the process of earning Bitcoins in exchange for running the verification process to validate Bitcoin transactions. The transactions provide security for the Bitcoin network and miners are in turn given Bitcoins as rewards. Examples of crypto mining pools you can join in Nigeria include BTC.com, Binance Pool, Slush Pool, Genesis Mining, Poolin, and more.
You need to know that to conduct Bitcoin mining for profit requires enormous amount of resources and time. You need to do a thorough research before getting into Bitcoin mining. With cloud mining, however, you don’t need to buy expensive computers. It is possible to make profit from cloud mining, but there are also many fraudulent cloud mining platforms. Most of them promise extremely high returns in a short period of time.
Which crypto wallet is best in Nigeria?
- Bitcoin is a digital currency. Therefore, after purchasing your Bitcoin, you will need to store it safely in one of the best cryptocurrency wallets in Nigeria. Crypto wallets can be hosted either by the cryptocurrency exchange or your own personal wallet. Crypto wallets are either cold (offline) or hot (online) wallets and they differ in terms of security. Cold wallets such as Trezor and Ledger are more secure than online wallets but they are expensive and may not be available to all. A good example of a hot wallet is Samourai. Muun is also a good cryptocurrency wallet in Nigeria for beginners.
Final Thoughts on How to Invest in Cryptocurrency in Nigeria
Bitcoin offers many opportunities to Nigerians despite the crypto policies imposed by the Central Bank of Nigeria (CBN). With the many available ways to make money with Bitcoin in Nigeria, it is important to know that investing in Bitcoin involves technical and security concerns which you must consider before starting to invest. There are several Bitcoin investment strategies you can employ for safe investing and lowering risks. Do your research and choose a strategy that works best for you.