Nigeria has witnessed a remarkable surge in cryptocurrency activity, with transaction volumes exceeding N75 trillion (approximately $50 billion) from July 2023 to June 2024, as reported by Emomotimi Agama, the Director-General of the Securities & Exchange Commission (SEC).
Addressing the Chartered Institute of Stockbrokers at their annual conference, Agama emphasized that this enormous crypto transaction volume reveals a strong yet misdirected appetite for risk among Nigerians, which simultaneously challenges the conventional capital market framework.
During his keynote presentation titled “Evaluating the Nigerian Capital Market Masterplan 2015-2025”, Agama pointed out that despite the booming crypto sector, less than 4% of Nigeria’s adult population actively participate in the traditional capital market.
This contrast highlights a compelling reality: Nigerians demonstrate a willingness to engage in high-risk financial ventures, yet many shy away from formal investment platforms.
Agama lamented that fewer than three million Nigerians are registered participants in the capital market, whereas over 60 million are involved in daily gambling activities, collectively wagering around $5.5 million each day.
Clearly, there is a robust risk appetite among Nigerians, but it is largely directed away from traditional investment avenues.
According to Agama, the crypto market attracts a segment of investors who possess both financial acumen and a high tolerance for risk, yet the established capital market has struggled to engage this demographic. He described this as a “paradox.”
“There is evident enthusiasm for risk-taking, but a lack of trust or accessible channels to direct this energy into productive investments,” he explained.
The implications are profound. Nigeria’s market capitalization relative to GDP is approximately 30%, significantly trailing behind South Africa’s 320%, Malaysia’s 123%, and India’s 92%, Agama noted.
This disparity suggests that while substantial funds circulate within financial channels, the formal investment ecosystem remains underdeveloped, resulting in insufficient capital for infrastructure and business growth.
Agama also pointed out that the ambitious Capital Market Masterplan (CMMP) for 2015-2025 has only achieved less than half of its 108 targeted initiatives, hindered by poor integration with national development strategies, inadequate performance tracking, and limited stakeholder engagement.
The significance of the N75 trillion ($50 billion) crypto transaction volume extends beyond mere numbers; it reflects dynamic momentum in a country where the formal equity market struggles with low retail participation, limited diversity, and liquidity concentrated in a few large-cap stocks.
Reasons Behind Nigerians’ Preference for Crypto Over Traditional Capital Markets
Agama’s observations reveal that cryptocurrency, despite its relatively lax regulatory environment compared to traditional markets, resonates with investor behaviors that the conventional system has yet to capture.
This data prompts critical questions for regulators, policymakers, and market architects: Why do millions of Nigerians bypass the stock market? What structural obstacles-be they regulatory, educational, cultural, or technological-prevent them from channeling their risk appetite into equities, bonds, or enterprise investments? How can Nigeria transform this vibrant speculative energy into sustainable capital formation that fuels economic growth?
Trust is another crucial factor. The fact that millions are comfortable trading volatile digital assets but remain hesitant to participate in listed markets suggests deficiencies in governance, transparency, accessibility, and investor education within Nigeria’s formal financial sector.
In response, Agama advocates for a “reimagined SEC” that transcends its traditional regulatory role to become an enabler-fostering trust, transparency, and inclusivity within the market.
With Nigeria facing an estimated $150 billion annual infrastructure funding shortfall, and only a small portion of this gap addressed through public-private partnership bonds, the development of a robust, vibrant capital market is more critical than ever, yet remains underexploited.
Ultimately, the message is clear: Nigerians possess a strong appetite for risk, but this energy is currently channeled into cryptocurrency rather than the formal corporate financial market. Bridging this divide will require clear regulatory frameworks, comprehensive investor education, improved technological access, and above all, a capital market that is perceived as accessible, trustworthy, and rewarding.
For Nigeria’s financial sector, the challenge is no longer about finding willing investors-they are abundant. The real task lies in converting this enthusiasm into structured, productive investments that generate long-term value for both investors and the broader economy.