In Nigeria, Bitcoin trades at the equivalent of about $37,000. Although this represents a premium of almost 38% compared to its “official” price, let’s try to understand how this is possible.
Bitcoin at $37,000 in Nigeria
If for most cryptocurrency investors, Bitcoin (BTC) is currently shipping around $23,100, it is very different in Nigeria. And for good reason, if we rely on platforms like Paxful or NairaEx, it trades at a price of just over 17 million naira (NGN) according to the sources, ie about $37,000. This shows so almost a 38% premium compared to the “world” price of BTC.
First, it is necessary to specify how such a correlation could occur. It is indeed more difficult for Nigerians access to the liquidity of major global exchanges such as Binance in particular. In fact, it appears that this platform can only be used locally for its peer services.
Furthermore, if Nigerians find it difficult to access global markets, forcing them to look at local markets, it is also more difficult for international players to trade in the Nigerian markets. This therefore means that if de-correlation occurs, arbitrage opportunities are more difficult to seize than they would be between Kraken and Coinbase for example, which makes these price differences possible to survive.
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Why are Nigerians turning to Bitcoin?
The Central Bank of Nigeria (CBN) is pursuing a policy to digitize its economy. Let’s remember that with 219 million inhabitants in 2022, Nigeria is the most populous country in Africa and the seventh to sixth most populous country in the world.
Moreover, the CBN imposed withdrawal limits on December 6. Hence, ATM withdrawals are capped at 20,000 and 100,000 NGN on a daily and weekly basis respectively. At the current exchange rate, this equates to 43 and 217 dollars.
In addition, the Central Bank has changed its banknotes and the inhabitants of the country have until next February 10 to exchange their old banknotes for new ones. Add to this the consumer price index (CPI) of the country it has posted a very high inflation rate of 21.34% for December 2022.
All these elements are then many arguments in favor of cryptocurrencies, which allows you to hold your money and at the same time, a central bank can fail in its mission.
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Sources: Trade Economics; Paxfull, CBN
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