Nigerians have been investing in cryptocurrencies to guard their capital against a weakening naira, which has led to the hack of the national currency to the lowest point in several years.
Abubakar Mohammed, a bureau de change operator, stated the naira dropped to 670 to 1 dollar on Wednesday in Lagos, the country’s main commercial area. That compares to 424.34 Naira listed on the official spot market as of 9:22 a.m local time.
Crashing Economic System
The largest economy in Africa operates a currency multiple exchange rate system centered on an official rate which is coordinated by the Central Bank of Nigeria. In addition, the nation also has a black market, where the exchange is regulated by supply and demand, making it a fairer reflection of the national value of the naira.
Despite the optimism diminishing in the Nigerian naira, people are flocking to cryptocurrencies since they are losing confidence in the currency. Aminu Gwadabe, president of the Association of Bureau de Change Operators of Nigeria, said by phone that the USD rate for crypto might be an indicator of the value of the local currency.
The largest economy on the continent, Nigeria, still abides by Central Bank of Nigeria regulations prohibiting banks from participating in cryptocurrency trading. Many Nigerians, however, share information about their cryptocurrency trading activities on the peer-to-peer market where transactions are priced in U.S. dollars.
The total price of the greenback was 687.6 naira on the morning of Wednesday, based on data from the world’s biggest cryptocurrency exchange, Binance Holdings, Ltd., indicating an impending weakening of this currency on the black market.
People are buying dollars to purchase digital assets, Gwadabe mentioned. “The USD buy rate on the crypto floor is moving at the same time as the local rate,” he added.
The Binance platform shows Nigerian citizens conducted nearly $103,691 of cryptocurrency trades in 24 hours to 10:36 a.m. in Lagos on Wednesday. They traded more than $185 million of Bitcoin in the three months prior, accounting for about 25 percent of transactions on Paxful, a trading website.
Despite starting the day at N675, the exchange rate between the Naira and USD on Wednesday morning fell below the N710 threshold on the black market.
The Naira crashes certainly comes along with some psychological pressure which includes exports getting cheaper to foreign customers and an expensive cost on imports.
The crypto market crash can’t be blamed for this impending financial disaster. So who is to be blamed?