Naira, a basic monetary unit of Nigeria, now has a “crypto exchange rate” as a competitor.
Nigerians have been stockpiling cryptocurrency since 2020 due to their lack of faith in the Naira.
According to a Bloomberg report, the current exchange rate system is dominated by the official and black market, leading to people losing faith in the current exchange rate system.
Aminu Gwadabe, President of the Association of Bureau de Change Operators of Nigeria, spoke with Bloomberg regarding introducing the new rate and stated, “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.”
Naira is controlled by the Central Bank of Nigeria. And there is a parallel unauthorized black market where the market rate variation depends on demand and supply.
However, Nigerians use USD to buy cryptocurrencies.
The official exchange rate of the Naira to the dollar fell as low as 424.34 on July 27. And the black market rate weakened to 670 Naira making it 58% more expensive than the official controlled rate.
According to a study conducted by KuCoin in April 2022, the growing number of Nigerians investing in crypto is propelled by the lack of proper fiat-based opportunities.
Also, more than 30 million people in Nigeria traded digital assets in the previous six months.
Nigerians traded $185 million worth of bitcoin on Binance during the first quarter of 2022.
The acceptance of cryptocurrency has increased due to Nigeria’s limited access to monetary services. Additionally, vast rural regions lack a proper banking system.
Even though cryptocurrencies are not legal in Nigeria, there has been a spike in their adoption.
People aged 18 to 60 have owned or traded in cryptocurrencies.
The Government of Nigeria has not made crypto illegal. However, banks and other financial institutions are banned from trading in them.