Nigeria’s exchange rate system dominated by the official and black-market rates now has a “crypto exchange rate” as a competitor since Nigerians have been accumulating crypto since 2020 due to low confidence in the Naira, the Bloomberg reports.
The Association of Bureau de Change Operators of Nigeria’s President, Aminu Gwadabe, talked to Bloomberg about the emergence of the new rate and said:
“More people are buying cryptocurrencies because they are losing confidence in the naira. The USD rate on the crypto floor is used in determining the value of the local currency,”
The official rate of the Naira is under the Central Bank of Nigeria’s control. On the other hand, the unauthorized black-market rate changes based on supply and demand reflected Naira’s real value more accordingly.
However, as Nigerians buy USD to purchase digital assets, the new crypto exchange rate may present the best representation of the Naira’s value. On July 27, Naira’s official rate against the USD dropped as low as 424.34 per USD. However, the black market rate weakened to 670 naira, which is 58% more expensive than the officially controlled rate.
During the same period, Binance recorded transactions from Nigerian wallets worth up to $103,691 within 24 hours. For the first quarter of 2022, Nigerians traded $185 million worth of Bitcoin on Binance.
Nigeria has one of the highest crypto adoption rates in the world. The interest in crypto spiked in 2020 for Nigerians. It spiked so much that Nigeria became one of the countries that led the 880% crypto adoption increase that year. In 2021, 24.2 Nigerians said they held at least one digital asset.
According to Gemini’s 2022 Global State of Crypto report, 26% of Nigerians hold at least one form of crypto assets. A majority of the nation (63%) see crypto as the future of money, while more than 44% of non-crypto owners said they’re interested in buying crypto in the coming year.
The Nigerian government seems like it is constantly having a change of heart when it comes to crypto.
Upon the adoption spike among Nigerians, the government started to work on e-Naira, the country’s stablecoin, in September 2021. In October 2021, the government announced that the e-Naira project was indefinitely suspended. Then they launched the e-Naira two weeks after.
After the launch of the e-Naira, Nigerian officials prohibited all financial institutions from operating crypto accounts.