DISCLAIMER: This article was updated on January 31 to clarify that the “Bitcoin premium” I was originally aiming for is a direct result of the disparity between the official dollar-naira exchange rate and actual market conditions, not the price of Bitcoin itself. Furthermore, the update omits the conclusion that the ATM withdrawal limit caused the “Bitcoin premium” in Nigeria.
The price of Bitcoin (BTC) has skyrocketed to well above world market levels, but only if the official Naira to US dollar exchange rate is used for the calculation.
At press time, the price of 1 BTC on the Nigerian NairaEX exchange is 17.8 million Naira, which is equivalent to a whopping $38,792 at the official price. However, local media reports that the official exchange rate for foreign currencies indicated by the Central Bank of Nigeria (CBN) does not reflect the actual price of the US dollar available to Nigerian citizens.
The CBN shows that one dollar is equal to 460 naira as of January 30. However, the parallel market exchange rate for the US dollar, or the actual price at which Nigerian citizens can transact in US dollars, is close to 750 naira. The disparity between the official naira to USD exchange rate and the actual market value of the USD for Nigerian traders causes a 60% “premium” on the current market price of Bitcoin, around $23,700 at press time .
Recently, CBN introduced new naira notes with the aim of curbing inflation and money laundering. The central bank imposed a deadline of January 24 for Nigerians to exchange their old, higher-denomination notes for the new currency.
However, there were long queues and complaints about lack of time to meet the deadline. The central bank has extended the deadline to February 10, the BBC reported on January 29.
It is not the first time that the Bitcoin premium has skyrocketed in Nigeria. In February 2021, the central bank banned regulated financial institutions from servicing local cryptocurrency exchanges, sending the BTC premium skyrocketing to 36%.
The recent interest in Bitcoin has also made Nigeria the leading country for Bitcoin searches on the internet, according to Google Trends.
BREAKING: Nigerian central bank introduces new cash withdraw limits (20,000 naira ~ $44 daily) and announced that all old naira bills will be worthless at the end of January.
Nigeria is leading the „How to buy #Bitcoinsearch worldwide pic.twitter.com/O26si2nHde
— Carl â‚¿MENGER âš¡ï¸ (@CarlBMenger) January 18, 2023
In addition, on January 26, Reuters reported that the Central Bank of Nigeria had launched a national card scheme to compete with foreign cards such as Mastercard and Visa.
The “AfriGo” card scheme was designed to give Nigerians better access to bank card services and avoid often expensive foreign card fees and conversion costs.
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