Despite Challenges, Nigerian Bitcoin Miners Are Poised To Profit
Nigeria is leading Africa in Bitcoin adoption, and miners there are overcoming regulatory and power grid challenges to find economic freedom.
This is an opinion editorial by Emeka Ugbah, host of the “Bitcoin This Blockchain That” podcast based in Rwanda.
Imagine that you are nursing a cup of caffé mocha in a coffee shop in Lower Manhattan. Then you overhear this African-looking fellow — who, from his countenance, confident demeanor and high-energy voice, strikes you as a Nigerian — saying that he is a Bitcoin miner. You would probably try to get a better glimpse of the fellow, because you immediately think that he is one of them — those scammers who slide into DMs, promising mouth-watering ROIs if you invest in their Bitcoin mining schemes. He can’t possibly be legit.
Yes, I would probably think the same if I were in the booth with you, even though I am Nigerian.
We all know that Nigeria is considered the African nation with the highest adoption rate of bitcoin and cryptocurrencies — a story that I love to tell. However, having Bitcoin's proof-of-work consensus mechanism in mind and how dependent on power it is, as well as the fact that Nigeria isn't a dependable choice when it comes to cheap or stable electricity, it is hard to imagine that any significant hash power could emanate from the country.
So, in truth, you would probably be correct in thinking the fellow isn’t legit. But should you?
Obstacles For Mining Bitcoin In Nigeria
Lack Of Reliable Power
Nigeria is the 14th largest African country by landmass and its most populous, with a population of more than 200 million people, of which approximately 52% live in urban areas. It is disconcerting to know that these people have to depend on a depressing 4,000 megawatts that the nation’s power grid manages to generate.
I used the adjective “depressing” because that is the actual state of the power situation in the country. Homes and businesses — from small scale to larger establishments — are often forced to secure alternative power sources or risk staying in the dark and ceasing operations until power returns. These alternative power sources, from petrol- and diesel-powered generators to solar, are supposed to serve auxiliary power in typical scenarios. But in the case of Nigeria, they have now become the main sources of power for many in the country.
So, it's almost inconceivable that Bitcoin mining can be successful in the country. But it is — Nigeria does indeed contribute to Bitcoin’s global hash rate, and I'll tell you how as we progress with this conversation.
Unclear, Borderline-Hostile, Regulatory Landscape
As with nation states, Nigeria’s stance on Bitcoin and cryptocurrencies has been somewhat combative.
We vividly recall that fateful Friday, February 5, 2021, when the apex bank, the Central Bank of Nigeria (CBN) released a statement warning all financial services providers to discontinue any bitcoin- or cryptocurrency-related transactions. And the warning didn’t end there: banks were also directed to freeze the accounts belonging to any individual or entity that had previously utilized the bank’s infrastructure as an on- or off-ramp into and out of cryptocurrency exchanges.
Manyaccounts were subsequently frozen as per the directive, which forced Nigerians to increasingly adopt the peer-to-peer system of value exchange which was, after all, one of the reasons behind the creation of Bitcoin in the first place: the transfer of value from person to person, without the need of a trusted third party.
Despite the fact that Nigeria’s Securities and Exchange Commission (SEC) recently issued some regulations that seem to be a little less hawkish toward digital assets, things remain largely unclear on what stance regulators will take toward mining, especially because miners (for lack of a better term) “print money.”
Resilience Amid Adversaries
There are a plethora of things — great things — that Nigerians are known for, although some of the first things that come to mind when many people think of Nigerians can be less than confidence inspiring.
Nevertheless, it is also known by many that a Nigerian can survive, and even thrive, in the harshest conditions. This is evident in the fact that one out of every five people of African origin — found anywhere in the world, no matter how inhospitable the place is — is Nigerian.
As a Nigerian, I can attest to this resilience. We have this innate ability to adjust and adapt to almost any condition, almost anywhere that we find ourselves. At this point in the conversation, the fact that there are Nigerians who have ventured into Bitcoin mining, damning the debilitating odds, shouldn’t be too much of a surprise, right?
It is challenging to determine when exactly the first ASIC based in Nigeria connected to the Bitcoin network, because miners there are putting a great deal of effort into staying as off-the-radar as possible. And yes, I know that the hash rate generated from the country might not amount to as much as a blip or a pulse in the network. As a matter of fact, a fairly-debated data source has it that Africa as a whole contributes less than 0.2% of the global Bitcoin hash rate. However, the innovative effort the Nigerian miners are putting into securing the world’s most decentralized, censorship-resistant monetary system shouldn’t go unnoticed — their stories shouldn’t stay untold.
Stories From Nigerian Bitcoin Miners
When I started researching this topic, I was privileged to get in touch with a few individuals who mine Bitcoin in Nigeria. We had long conversations about how they got into it and how they are managing to navigate through the challenges they are constantly faced with. For security reasons, which border around the hostile regulatory landscape I mentioned earlier, they chose to stay anonymous, so we will be referring to them by pseudonyms.
The first individual, let's call him Kola. Relatively new to Bitcoin mining, Kola began his journey in September 2021 with just one unit of the Antminer S9, which he purchased for about $450 to $500 at the time. According to him, he decided to take a stab at mining with that one ASIC but has since then expanded and acquired seven others, all of which are Innosilicon T2THs, all purchased as used miners from China and shipped to Nigeria. Then, so as not to give room for too many questions from the authorities, especially considering the fact that he is importing "money printing" machines, the ASICs were cleared at customs as computer graphics processing units (GPUs)
Kola chose not to divulge his location, however, stated that his operation is situated somewhere in the north-central part of the country, close to one of the nation's hydroelectric power sources. As a result of being close to this major source of power which makes it relatively cheap, Kola spends as little as $15 to $20 monthly on electricity to run his operation. However, seeing as the “Nigerian factor” still comes into play, he said that he gets between 20 to 22 hours of electricity supply per day. Being solely dependent on that one power source means that he is subjected to shutting down operations for between two and four hours each day.
Now, here’s another interesting bit: Due to the unclear regulatory state of things and to the local power authorities, Kola’s mining operation is written off on the books as a facility that houses servers for cloud storage renting services. Interesting, right?
I had a long conversation with Kola and I can go on and on detailing all that we talked about, but this article isn’t only about my conversation with him, so I’ll wind it up here.
Now, the second individual is a more seasoned Bitcoin pleb, who has been in the space considerably longer than Kola. Let’s call him Gbenga. He requested that I keep a lot of what he shared with me about his setup off the record, so I'll be more discreet with specifics here.
With several Antminer S9 ASICs, all purchased as “used,” and imported from China, again as computer GPUs, Gbenga’s operation is situated in the outskirts of the nation's largest business hub, Lagos. Much like Kola, Gbenga started his mining venture with a much lower number of ASICs than he operates with now, and he has exponentially expanded, seeing as he is a bigger player in the space.
Gbenga’s setup is one of the many businesses in the country that depend on alternate power sources for electricity, In his case, a 200 KVA diesel-powered generator. Now, this would, in an ideal situation, not be an advisable venture, considering the fact that the price per liter of diesel in the country goes for a little more than $1 at the time of writing, and his operation runs through 300 liters per day on the average or, on days where it gets power supply from the grid, for about half of the day. But Gbenga has affiliations with a few big-time individuals in the oil and gas industry, so he gets diesel at a much cheaper rate than is obtainable in the open market.
According to Gbenga, his major challenge has been the constant need to maintain and repair the ASICs as they often develop power-related issues due to the unstable supply of electricity. He, however, has a team of skilled technicians and electricians, recruited from the pool of local talents, that didn't initially have experience working on ASICs, but as a result of working in Bitcoin mining and with Gbenga, have gained the requisite skills.
Bitcoin Mining’s Future In Nigeria
There are so many other Bitcoin miners in Nigeria. A lot of them weren't enthusiastic to talk to me because they are worried about their safety — for good reason, too. However, that doesn't mean that there aren't big players already in or researching ways to get into the mining space.
We may yet be a long way away from Africa contributing to a large portion of the global Bitcoin hash rate, but with individuals like Gbenga and Kola, as well as all the others within Nigeria and Africa as a whole, along with the ever growing adoption of Bitcoin in the continent, it may not be too far fetched that the future may not be so distant.
The greatest challenge facing it all is funding. We all know how difficult it is to get loans in the traditional financial space, particularly in Nigeria — you have to know someone who knows someone. But the playground will definitely look different the minute that corporate entities and big businesses — from the telecom space, to banking and restaurant chains, which have tons of stranded electricity because they have to keep their facilities running round the clock — realize what Bitcoin is. It incentivises the use of stranded electricity, converts that with the proof-of-work protocol into a store-of-value asset with a deflationary supply, and yields asymmetric returns.
This is a guest post by Emeka Ugbah. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.
Read more: https://bitcoinmagazine.com/business/nigeria-bitcoin-miners-will-profit
Text source: Bitcoin Magazine: Bitcoin News, Articles, Charts,
