Nigeria’s cashless bid has propelled Bitcoin’s premium to 63% in the last few days. Nigerian President Muhammadu Buhari introduced a new design for naira currency notes on November 23, 2022, to reduce excess cash use and combat crime.
At that event, the other attendees included top Cabinet members, central bank officials, and the anti-graft agency. In the early hours of the day, at the State House that Wednesday, they officially launched the redesigned 200, 500, and 1,000 naira bills.
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It was proposed that the new bills be in circulation along with the old ones until January 31, 2023, when the old notes cease to be legal tender. Before the extended deadline date was announced yesterday, there was a frenzy in different geographical locations because many traders and institutions have refused to recognize the old notes as legal tender.
Interestingly, this frenzy has benefited citizens who own digital currencies, especially bitcoin owners. Coupled with the deadline on these old notes, the Central Bank of Nigeria restricted the amount of money users could withdraw at ATMs. These have culminated in a swift resort to using cryptocurrency to carry out daily transactions.
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Bitcoin premium ranges between 60%-120% amid Nigeria’s fiscal policy
Significantly, one bitcoin (BTC) is worth 17.8 million Naira on the Nigerian cryptocurrency exchange NairaEX. According to the official currency rate, this equals $38,673. Compared to the current market price of BTC at $23,603, it is 63% more expensive.
However, according to reports, most Nigerians can only access the 700 Naira to a dollar black market exchange rate. This is the same price in dollars shown on most domestic cryptocurrency exchanges, such as Binance and Bybit.
Peer-to-peer exchange rates on LocalBitcoins have risen to a staggering $62,000, representing a significant premium of 162%. The weekly cap on over-the-counter (OTC) cash withdrawals was set at 500,000 NGN for businesses and 100,000 NGN for individuals.
With regard to ATM withdrawals, people were only permitted to make a daily withdrawal cap of 20,000 NGN ($43.4) and a weekly withdrawal cap of 100,000 NGN ($217). Cash withdrawals were set at 500,000 NGN for businesses and 100,000 NGN for individuals.
With regard to ATM withdrawals, people were only permitted to make a daily withdrawal cap of 20,000 NGN ($43.4) and a weekly withdrawal cap of 100,000 NGN ($217). On January 9, right before the release of new Naira banknotes, these limitations went into force.
Speculation grabbed centre stage, with some claiming that the government’s move was made to stop money laundering and inflation. With the deadline pushed forward to February 10, citizens have until then to exchange their old banknotes for new ones.
The Bitcoin premium has increased before in Nigeria. The central bank forbade regulated financial institutions from offering services to bitcoin exchanges in February 2021. This decision caused the price of Bitcoin to rise by 36% at the time.
Additionally, the Nigerian Central Bank released a study earlier this month establishing the legal environment for stablecoins and initial coin offers (ICO) in the nation. However, most of the information was on eNaira, the digital currency of Nigeria’s central bank (CBDC).
Nigerians rejected the central bank’s idea, despite their nation being the first in Africa to launch a CBDC in October 2021.
There is a new push for digital inclusion in daily transactions within the country. However, when the new notes gain full circulation and are available to all, would this digital shift nosedive and become a momentary event that rises when a similar design change happens?
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