As I write this article a Bitcoin in Nigeria is trading at $1280 USD (₦404,000), $550 USD more than the price of a Bitcoin in the United States ($730 USD) or a 70% premium. Bitcoin in Nigeria has experienced a rapid surge in pricing characterized by high trading volumes on the Nigerian exchange, BitX.
So why is the price rising?
The Bitcoin press attributes the 70% rise in premium in Nigeria primarily to a lack of liquidity , capital controls and investors’ desire to hedge against financial uncertainty. I, however, suspect that the notorious Ponzi scheme MMM is the root cause of Nigeria’s bitcoin bubble.
My evidence for this theory are the parallels between what is now happening with MMM Nigeria and what I observed during the rise and fall of MMM Zimbabwe.
The Zimbabwe Case
I use the local exchange BitcoinFundi to remit money to relatives in Zimbabwe. This past July and August—as MMM Zimbabwe peaked in popularity—I could sell bitcoin for up to 25% more than what I paid in the United States. MMM Zimbabwe incentivized people to transact in bitcoin by offering them a 50% monthly interest rate compared to a 30% return when using mainstream channels. Thus, the spike in Zimbabwe’s bitcoin price was probably due to MMM participants who wanted to chase the bitcoin bonus.
A few weeks later, when MMM Zimbabwe collapsed, the price of bitcoin in Zimbabwe briefly dipped below international prices before stabilizing at a 5% to 10% premium.
The selloff was the result of MMM participants who desperately sought to liquidate all investments associated with the scam. These sellers might have thought that bitcoin was under the control of MMM.
However, bitcoin is completely separate from MMM and continues to gain traction around the world. There are now lightly regulated exchanges like BitcoinFundi in many countries, where bitcoin can be legally bought and sold.
Thus, I suspect that the growing ease of converting between bitcoin and forex actually enabled MMM’s overseas operators to externalize value from the scheme. Capital controls make it very difficult to send money out of Zimbabwe and EcoCash only circulates within the country (though there are exceptions).
Contrarily, bitcoin is an internet-based currency which effortlessly crosses borders. I believe that MMM’s operators routed many bitcoin transactions directly to themselves while allowing mobile money and bank transfers within Zimbabwe to keep the system afloat.
The Nigeria Case
The MMM Nigeria case has many parallels to MMM Zimbabwe. Most significantly, bitcoin is at an all-time high in Nigeria at the same time that the popularity of MMM Nigeria’s website surpassed Facebook by some measures. As in Zimbabwe, MMM Nigeria incentivizes participation in bitcoin:
From now on, there is an opportunity for all of the participants of MMM Nigeria to acquire Mavro-50% when you provide help in Bitcoin. Mavro-50% work under the same rules as Mavro-30%. For example, all bonuses are rewarding to them according to the normal procedure.
Where is it headed?
My conclusion is that the soaring price of bitcoin in Nigeria is linked to the peaking popularity of MMM. I suspect that this premium will come crashing down when the pyramid crumbles and participants desperately try to cash out.
Until then, Sergei Mavrodi and his cronies will continue pushing bitcoin to help them siphon money out of the pocketbooks of not only Nigerians but participants around the world. So much money is sloshing around within MMM that sizable returns can probably be generated even if only a small fraction of transactions use bitcoin.
Mobile money and bitcoin are often optimistically touted as forms of “financial inclusion” which help marginalized people access to mainstream banking services or engage the global economy.
MMM’s implementation of both technologies demonstrates that there is much truth in such claims. However, it also demonstrates that financial inclusion can just as easily involve exploitation as empowerment.
William Suk is a PhD candidate at Syracuse University you can contact William via email at: william.suk@gmail.com
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6 comments
Please don’t lie to the public “There are now lightly regulated exchanges like BitcoinFundi in many countries, where bitcoin can be legally bought and sold” Very few exchanges are regulated and most operate from countries that allow them to avoid regulation ie Cyprus, Ukraine, Hong Kong, Seychelles etc. And the local exchange you try to promote overtly Bitcoinfundi is not regulated at all. TechZim please try to be more responsible with your content.
Thank you , don’t mislead people
Hi Thomas, you are more or less right on the point of regulation. The regulatory framework around bitcoin can be a bit shady sometimes. However there are beginning to be more heavily-regulated exchanges in the United States, like Coinbase. Also, bitcoin in Zimbabwe might not be regulated yet, but BitcoinFundi does comply with RBZ standard KYC and AML procedure in terms of collecting government identification for high value transactions. But ultimately yes—there is a lack of regulation in this space which does make it risky.
Personally, if you are looking for a fault in bitcoin –in my opinion the biggest problems are 1) it is being used in a lot of scams and 2) most of the bitcoin is owned by the early adopters—people in America, Europe and China who got into it early—who will benefit most if the system takes off. In other words bitcoin is fundamentally unfair because of its highly inequitable distribution of wealth.
You are right in that I am a customer of BitcoinFundi. However BitcoinFundi is currently the only operational exchange in Zimbabwe so it is the only one I can talk about. I have written about other bitcoin companies though, like bitpesa in Kenya – https://letstalkbitcoin.com/blog/post/in-depth-review-bitpesa
Another paid writer determined to sell lies and falsehood to gullible readers. In your mind, tr he so-called collapsed of MMM in Zimbabwe was because of Bitcoin while the ones you promote are “standing” strong. MMM never “collapsed” in Zimbabwe or anywhere else in the world but people simply responding to the frenzy occasioned by your voice pure lies and twisted stories. Your colleagues did the same thing in SA and failed. You tried in Zimbabwe and failed too. MMM is still running smoothly in SA and Zimbabwe till this moment. Ditto Nigeria and elsewhere.
3m ichiri kushanda here? Shua? Kunyepa. The main problem with bitcoin in Zimbabwe now is that it is being used by scams. Coming soon will be a blog about the many scams that use bitcoin. Ende akawanda.
This is a very informative article – especially to some of us without vested interests in the matters reported. Good work.