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
While for most cryptocurrency investors, Bitcoin (BTC) is currently hovering around $23,100, the situation 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) depending on the sources, or around 37,000 dollars. This therefore represents a premium of nearly 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 to access liquidity from 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, while it is difficult for Nigerians to access global markets, forcing them to turn 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.
Why are Nigerians turning to Bitcoin?
The Central Bank of Nigeria (CBN) is currently pursuing a policy to digitize its economy. It should be remembered, however, that with 219 million inhabitants in 2022, Nigeria is the most populous country in Africa and the seventh to the sixth country in the world with the most inhabitants.
In addition, the CBN imposed withdrawal limits on December 6th. 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 country’s Consumer Price Index (CPI) posted a particularly high inflation rate at 21.34% for the month of December 2022.
All these elements are then so many arguments in favor of cryptocurrencies, which allow you to really hold your money when at the same time, a central bank can fail in its mission.