South African bitcoin exchange ICE3X has launched bitcoin trading in Nigeria for the first time, opening up a potentially huge market for bitcoin in Africa's most populous country.
The company has formed an exclusive partnership with Nigerian payment processor VoguePay, allowing users to buy and sell bitcoins using the local currency, the naira, directly from existing VoguePay wallets.
ICE3X is also planning to roll out merchant services allowing local businesses to accept bitcoin.
Breaking new ground
Speaking to CoinDesk, ICE3X (pronounced 'ice-cubed X') founder Gareth Grobler described Nigeria as "virgin territory" for bitcoin, with only a small number of traders and hobbyists involved so far.
"The market, however, is potentially massive. VoguePay have spotted the opportunity bitcoin offers, seeing as one of the primary attributes of bitcoin is its security. Nigerian online consumers simply do not have the same access to goods and services from international vendors due to one simple thing – credit card fraud. Bitcoin solves that problem."
Setting up in the country was "pretty straightforward", Grobler added, saying it was simply a matter of expanding the business and infrastructure ICE3X already operates in South Africa.
By building a more advanced online payment system in Africa, a VoguePay spokesperson said, the company will pave the way for young African entrepreneurs to foster better business relationships, making the online markets more accessible to millions of Africans.
VoguePay's executive and research teams are based in Canary Wharf, London, while its development, operations and professional services groups are located in Nigeria's largest city, Lagos.
Massive youth market
Nigeria has over 177 million people, 33.6 million of whom are in the 18–35 age bracket, making it home to one of the largest youth populations in the world. Depending on the statistical methods used, it is also considered Africa's largest economy.
According to the Nigeria Communications Commission, in June 2013, the country had 48.1 million active Internet subscriptions through mobile phone networks, yet ICE3X says this space has been largely ignored by the digital currency advocates.
Setting up a bitcoin exchange may have been the easy part, though – Nigeria may have other hurdles to overcome if it is to participate in the global bitcoin economy.
It is the country that gave name to, and is synonymous with, the notorious '419 scam' phenomenon, which should be familiar to anyone who has ever used email.
Bitcoin may not be able to prevent such crimes from occurring, but it's important to remember 419 scams have operated just fine for decades in the fiat currency space without bitcoin's help.
Additional security measures enabled by bitcoin, such as multisig wallets and escrow accounts, could help overseas customers transact with legitimate Nigerian businesses with greater peace of mind.
That's exactly the problem bitcoin solves, Grobler said.
"The idea is that, for example, a farmer in Nigeria can buy a tractor from a supplier in the USA, and both parties could benefit from the near instant, secure and transparent funding solutions underpinned by the bitcoin technology."
It is "only natural" for Nigeria to want to take part in these new opportunities, he continued, and is a market that simply cannot be ignored any longer.
This is true even if bitcoin is not quite ready for everyday use as money.
"We have to be realistic though, bitcoin technology has yet to be packaged and applied correctly for it to be a mainstream alternative currency, but as an agnostic payment settlement mechanism within a larger framework it ticks all the boxes and could perhaps have a significant impact on shaping the Nigerian digital economy landscape."
Building a solid customer base in Nigeria aligns with ICE3X's longer-term product development strategy to have a robust, well tested infrastructure from which to launch its solutions.
ICE3X "cannot forsee" entering any additional African markets at this stage, Grobler said, but does plan to launch a USD market later this month.
Nigerian currency image via Shutterstock