The exchange rate between the Naira and Dollar which is merged with huge volatility, with the Naira currently at N720 per $1 at the parallel market, has caused panic among Nigerians.
Recall that the CBN threatened to prosecute anyone caught purchasing the dollar at any of the financial institutions in the country. This has however forced a lot of Nigerians to move into the crypto space by amassing dollar-dominated digital assets as a hedge against the collapse of the local currency (Naira).
Stablecoins and Bitcoins are said to be the most purchased digital assets, causing the fiat local currency (Naira) to plunge to an all-time low record in the black market. According to recent data, Nigerians traded over $5 million worth of Bitcoin on the popular P2P trading website. Pax full and local bitcoins saw a 258% increase from last week.
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A large percentage of Nigerians have nonetheless gone contrary to the CBN law as they continuously exchange digital currency in the peer-to-peer market where transactions are priced in dollars. Recall that the Apex bank issued a warning to other banks to desist from aiding cryptocurrency transactions.
The CBN had in 2017 disclosed that digital currencies such as Bitcoins, Litecoin, and others are widely used in financing terrorism and money laundering, considering the anonymity of virtual transactions.
Displeased with the CBN law on the trading of cryptocurrency, a large percentage of the citizens have argued that the CBN is creating money out of thin air, as the currency is unbacked by tangible assets.
They further claimed that the CBN manipulates the supply of money to create inflationary pressures and asset bubbles in the economy. Others view it as an avenue for the CBN to exert control over economic and fiscal policy.
Despite the CBN restrictions on crypto trade in the country, in the first three months of the year 2022, Nigerians traded at least N77.75bn ($18m) worth of Bitcoin which saw a 5.71 percent increase from the N73.54bn worth of bitcoin that was traded in the year 2021.
Nigeria was said to be the highest trading country in the year 2021, with 16,000 daily trades, occupying the sixth position of leading nations in the world in terms of crypto adoption. As Nigerians continue to pile into cryptocurrencies due to low confidence in the Naira as a result of constant devaluation. It has been reported that the accumulation of cryptocurrencies is being used as a hedge against the weakening naira.
People are buying dollars to purchase digital assets, as the USD buy rate in the crypto market is moving at the same local rate. Binance, a trading platform, has revealed that Nigerians have conducted many trades in digital currencies over the last few days.
Analysts have blamed the continuous devaluation of the Naira on rising import bills, savings in dollars, and the accumulation of digital assets by Nigerians. With the continuous fall of the naira, the senate has resolved to invite the CBN Governor Mr. Godwin Emefiele to appear before the senate in plenary to address the lawmakers behind closed doors, over the constant fall of the naira in recent weeks.