Cryptocurrency and Its Role in Nigeria’s Economic Growth: An Exploration of Investment and Trade Opportunities

This study investigates the impact of cryptocurrency adoption on the Nigerian economy, with a focus on three key economic variables: exchange rates, financial inclusion, and remittance flows. Cryptocurrency adoption is proxied using aggregate cryptocurrency transaction values and trend data on user engagement in Nigeria. Using a quantitative research design, the study employs time-series data from 2010 to 2023 and applies advanced econometric techniques, including the Vector Error Correction Model (VECM), which is particularly suitable for examining both short-run dynamics and long-run equilibrium relationships among co-integrated variables. The results reveal that cryptocurrency adoption has a negative impact on exchange rates, potentially contributing to the depreciation of the Nigerian Naira due to increased capital outflows. Conversely, cryptocurrency adoption positively influences financial inclusion, as it provides access to financial services for the unbanked and underserved populations in Nigeria. Additionally, the study finds that cryptocurrencies facilitate remittance flows, with digital currencies serving as an efficient and cost-effective alternative to traditional remittance channels. The findings suggest a long-term equilibrium relationship between cryptocurrency adoption and these key economic variables. Although not the primary focus, improvements in financial inclusion and remittance flows linked to digital currencies may have indirect implications for broader economic growth. The study concludes with policy recommendations, including the development of a clear regulatory framework, promoting cryptocurrency adoption for financial inclusion, and encouraging its use for remittances. The research highlights the need for balanced regulation to harness the benefits of cryptocurrencies while mitigating their potential risks to the economy.