Bloomberg Businessweek: How Nigerians Beat Bitcoin Scams

The country’s embrace of the cryptocurrency has led to some old-school precautions against fraud.

“Ambassador” Smart Oluwadola, a cryptocurrency peddler in the city of Kano, in the hotel lobby where he often does business. (Tim McDonnell for Businessweek)

This story first appeared in Bloomberg Businessweek.

Depending on your feelings about Bitcoin, it may seem appropriate that Nigeria’s love for the cryptocurrency began with a scam. Mavrodi Mondial Moneybox (MMM), a 30-year-long global Ponzi scheme that began in Russia, roped in millions of Nigerians from late 2015 to the end of 2016 with promises of 30 percent returns in as little as 30 days. When the government began to crack down on bank accounts linked to the scheme, MMM’s operators cut the banks out and started requiring victims to use Bitcoin. By the time MMM suspended its payouts, shortly before Christmas 2016, it had robbed an estimated 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 consulting firm in Lagos. Today, Nigerians are trading 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 billion traded daily in U.S. dollars or Japanese yen, but comparable to 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 customers. Within the last year, we’ve added 90,000.”

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