Nigeria’s exchange rate system dominated by official and black market rates now has a “crypto exchange rate” as a competitor as Nigerians have been hoarding crypto since 2020 due to low confidence in the Naira, Bloomberg reports.
The Association of Bureau de Change Operators of Nigeria’s President, Aminu Gwadabe, spoke with Bloomberg about the emergence of the new rate and said:
More and more people are buying cryptocurrencies because they are losing confidence in the naira. The usd rate on the crypto floor is used to determine the value of the local currency.
The official Naira rate is under the control of the Central Bank of Nigeria. On the other hand, unauthorized changes in black market rates based on supply and demand better reflected the true value of the naira.
However, as Nigerians buy USD to purchase digital assets, the new crypto exchange rate may present the best representation of the value of the Naira. On July 27, the official rate of the Naira to the dollar dropped to 424.34 to the dollar. 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 in 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. Interest in crypto has increased in 2020 for Nigerians. It increased so much that Nigeria became one of the countries that led the 880% increase in crypto adoption that year. In 2021, 24.2 Nigerians reported holding at least one digital asset.
According to Gemini’s 2022 State of the World Crypto Report, 26% of Nigerians hold at least one form of cryptographic asset. A majority of the nation (63%) sees crypto as the future of money, while more than 44% of non-crypto owners said they were interested in buying crypto in the coming year.
The Nigerian government seems to have constantly changed its mind when it comes to crypto.
At the peak of adoption among Nigerians, the government began work on e-Naira, the country’s stablecoin, in September 2021. In October 2021, the government announced that the e-Naira project was suspended indefinitely. Then they launched the e-Naira two weeks later.
After the launch of the e-Naira, Nigerian officials banned all financial institutions from operating crypto accounts.