In Nigeria, Bitcoin trades at the equivalent of around $37,000. While 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 the majority of cryptocurrency investors, Bitcoin (BTC) is currently sailing around $23,100, it is quite 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, i.e. about $37,000. This therefore represents a premium of almost 38% compared to the “world” price of BTC.
First, it is necessary to specify how such a decorrelation could have happened. It is indeed more difficult for Nigerians access the liquidity of major global exchanges such as Binance in particular. Indeed, it would seem that it is only possible to use this platform locally for its peer-to-peer services.
By extension, if it is difficult for Nigerians to access global markets, thus forcing them to look to local markets, it is also more difficult for international players to trade in Nigerian markets. This therefore means that if a decorrelation occurs, arbitrage opportunities are more difficult to seize than they would be between Kraken and Coinbase for example, thus allowing these price differences to last.
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Why are Nigerians turning to Bitcoin?
The Central Bank of Nigeria (CBN) is currently pursuing a policy to digitize its economy. Let us remember that with 219 million inhabitants in 2022, Nigeria is the most populous country in Africa and the seventh to sixth most populated country in the world.
Moreover, the CBN imposed withdrawal limits on December 6. Thus, ATM withdrawals are capped daily and on a weekly basis at 20,000 and 100,000 NGN respectively. At the current exchange rate, this represents 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 change their old banknotes for new ones. Add to this that the consumer price index (CPI) of the country posted a particularly high inflation rate of 21.34% for the month of December 2022.
All these elements are then so many arguments in favor of cryptocurrencies, that allow you to actually hold your money when at the same time, a central bank can fail in its mission.
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Sources: Trading Economics; Paxfull, CBN
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I timidly discovered the world of blockchain at the end of 2018 during my quest for financial freedom. Initially invested moderately, it was only two years later that I took the gamble of betting everything on the movement that was taking shape then. I then dedicate 2021 to training myself better to acquire more knowledge and seriousness. As I often like to say: I still have a billion things to learn. And what I do know, I want to share with you.
Vincent Mayor
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