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one Bitcoin It trades for over $38,000 in Nigeria.
The price can be found on the Nigerian exchange NairaEx and is estimated at 17.8 million Naira. Despite Bitcoin trading at $23,200 across markets, this equates to $38,600, meaning in Nigeria he trades at a premium of 66%.
The premium comes at a time when Nigeria’s central bank is making a big push towards a cashless society.
ATM withdrawal limits have been enforced, limiting citizens to withdrawals of 20,000 Naira ($43 at current rates) per day and 100,000 Naira ($217) per week.
The central bank has also extended the deadline for citizens to exchange old banknotes this weekend from Jan. 24 to Feb. 10. High denomination naira notes were designed with the aim of reducing counterfeiting and the use of cash in society.
The move was widely criticized, with analysts raising one very obvious question. That is how the use of cash will decrease with the issuance of new banknotes. Nigeria is Africa’s largest economy and still relies heavily on cash.
Aside from questions about the big picture, Nigerians have accused them of not being given enough time to switch to the new banknotes.Many of Nigeria’s 210 million people live in rural There have been many stories of queues at banks while banks that need to be exchanged for new notes are not available.
The government announced plans to help people in such rural areas through bank officials just a week before the deadline, but controversy remained about not having enough time. There were also reports of a shortage of new banknotes, with private lenders only getting new banknotes a month before the deadline.
“There is no good news for those who feel the deadline needs to be staggered. My apologies,” central bank governor Godwin Emefil said last Tuesday.
Nonetheless, political pressure mounted ahead of presidential elections in the coming weeks, and central banks eventually yielded.
The chaotic unfolding is just the latest example of how governments around the world often manage money poorly. Nigeria has historically been no stranger to inflation either.
Zooming in to 2022, we can see that the currency has depreciated at a significantly higher rate than most developed countries around the world last year.
Against this backdrop, the central bank also announced the launch of a domestic card scheme last week. The goal is to create competition between Visa and Mastercard and move Nigeria toward a cashless society while saving on foreign transaction fees.
The goal may be admirable, but the reality of the situation makes pushing difficult. As mentioned earlier, this is still a society that relies heavily on cash, with large chunks of the population locked out of banks.
Some Bitcoin enthusiasts point to cryptocurrencies as a solution for Nigerians. To me, this feels a little idealistic. There is no doubt that Bitcoin is very accessible compared to banks in developed countries, but it still requires an internet connection.
Bitcoin fundamentals certainly make it interesting in a situation where the currency is under tight control and has historically been flirting with inflation, but forgetting the fact that Bitcoin itself has problems. Let’s not
A bitcoin was worth $68,000 a little over a year ago. Then it was $16,000 towards the end of last year. It’s now $23,200. For anyone living in rural Nigeria, this volatility is very harsh and, despite the hoopla from Bitcoin enthusiasts, is completely unworkable for now.
Bitcoin has very interesting attributes regarding economic development and currency collapse, and I think what could happen if the asset continues to mature.
However, in 2023, it is an extreme risk-on asset that is not suitable for storing assets. Naira may be feeling over 20% inflation right now, but Bitcoin can slice him 50% of its price. in a day.
It’s like the Big Mac index in purchasing power parity. A fun indicator of how expensive a country is, the Big Mac Index compares the prices of McDonald’s most famous burgers, the ubiquitous product, country by country.
Similarly, looking at Bitcoin trading prices can give you a hint of how well a country’s money is doing. Her 66% premium in Nigeria is a clear indication that there is real turmoil in the economy. It’s amazing the citizens willing to pay such huge price increases in order to withdraw cash from Naira.
Again, other factors may come into play. The Kimichi Premium explains the constant premium seen in the South Korean Bitcoin market, which is notoriously persistent over the years. This is largely a result of the ever-controversial regulatory issues surrounding Bitcoin.
At least this Nigerian story shows how fragile much of the world is when it comes to money. These episodes are happening more and more regularly in places like Argentina, Lebanon, and Turkey, so it’s no surprise that the buzz over the mysterious decentralized asset we’re calling Bitcoin is growing.
But it would be too simplistic to claim that Bitcoin is close to the solution. As for the future, who knows?
