Why Africans should embrace crypto to safeguard savings against inflation and currency devaluation

Most of us grew up listening to our parents and grandparents talk about how things used to be much cheaper and affordable in their days. Although we might not have understood the concept of inflation back then, we began to see its impact on our daily lives with time.

In 2020, governments responded to the global COVID-19 pandemic by injecting billions and trillions to revitalize their stagnant economies. However, as these economies reopened and local and retail commerce started picking up again, more money than goods were in circulation, leading to a steady increase in item prices.

Curious about crypto? Learn about it, one real-life solution at a time.

Over the past few years since the covid-19 pandemic, countries globally have struggled to raise their economies out of these unfavorable conditions. Unfortunately for the citizens in these nations, as inflation increases, the value of money erodes, leaving them to watch the purchasing power of their savings reduce drastically. 

The reality is even grimmer for people in emerging markets where the standard of living is already low, and inflation rates are in double digits.

According to Bloomberg, seven of the 10 worst-performing currencies against the United States dollar (USD) are African, with the Nigerian naira being the third-worst-performing currency in 2023. The naira is projected to experience its worst year in almost three decades in 2024, as the country is battling low oil production output and a concerning lack of foreign investment. 

The bleak reality can drown the dreams of anyone struggling to make a living amid rising inflation.

Stablecoins as a currency hedge 

However, crypto has become a popular medium to hedge against inflation over the years, as people often seek to invest in assets that maintain their value over time.

Joshua, a software engineer from Osun state, Nigeria, was able to escape the dilapidating effects of the inflation and constant naira devaluation when he started earning in stablecoins (a type of cryptocurrency that is fixed to a commodity or a fiat currency to maintain value) from his job in a crypto payments company.

“Switching to USDC has been a game-changer. My purchasing power is stable now. I can actually save for the future, invest in myself, and plan for my family.”

Speaking to Mariblock, he explained how he saves most of his income in the stablecoin USDC and only withdraws as much naira as he needs per time.

“Living with inflation in Nigeria was a constant struggle. Every month, prices went up, but my salary didn’t increase. It felt like I was running on a treadmill, just trying to keep up. I couldn’t save anything, and even basic necessities became increasingly expensive. Switching to USDC has been a game-changer. My purchasing power is stable now. I can actually save for the future, invest in myself, and plan for my family.”

Similarly, Daniel Jesusegun, a 22-year-old digital marketer based in Lagos, Nigeria, has been saving in crypto since his undergraduate days. He had been introduced to crypto by fellow students who were blockchain and cryptocurrency enthusiasts. He started converting his savings into crypto in hopes that it would gain value and avoid the constant depreciation of the naira.

Curious about crypto? Learn about it, one real-life solution at a time.

It’s been over four years since Jesusegun’s crypto journey started, and he has been able to save over a million naira in crypto and reinvest the interests yielded into his business and other interests, he told Mariblock. 

The next worst-performing currency on Bloomberg’s top-ten list after the naira is the Argentine peso, which experienced a 78.1% devaluation in 2023. The peso’s value has been in free fall since 2016, with factors such as government overspending and a lack of trust in the central bank causing the currency to spiral.

A large portion of the population has watched their purchasing power plummet and their savings vanish into thin air. As a result, many Argentines have turned to crypto to hedge against inflation. Bitcoin and stablecoin adoption have been on the rise in the South American country.

“It’s [crypto] easily accessible and transmissible. It’s serving, in many cases, as a way to protect value.”

Marcos Zocaro, an accountant and spokesperson for the Bitcoin Argentina NGO that has been promoting the use of cryptocurrency in the country since 2013, said in an interview with The Block that crypto adoption started to pick up around 2020 in the South American country.

“People want to protect their purchasing power,” he said. “From around 2020, many people started buying bitcoin and stablecoins. The crypto market has grown in Argentina, grown a lot. Many people need to send funds abroad to family and friends or pay for goods from abroad, and with all the international restrictions, many have started to use crypto. It’s easily accessible and transmissible. It’s serving, in many cases, as a way to protect value.”

“We just need better infrastructure and education to make it more accessible for everyone.”

Economies globally face downtime and are projected to experience slow growth over the next few years. Although the global financial landscape might be complex, helpless Africans are not left without options. Crypto, particularly stablecoins, offers a tool for people to protect their income from ravaging inflation and currency devaluation.

“I believe crypto will play a huge role in Nigeria’s future. People are desperate for alternatives to the naira, and crypto offers transparency and financial freedom. We just need better infrastructure and education to make it more accessible for everyone,” Joshua told Mariblock.