Central Bank of Nigeria has used another tactic to push its citizens towards a cashless society has led to a sharp increase in the price of Bitcoin in the country. The shift to a digitized economy has prompted people to resort to the flagship cryptocurrency in order to carry out daily transactions.
The price of one Bitcoin (BTC) on the Nigerian crypto exchange NairaEX is currently 17.8 million Naira. This equates to $38,673 per the official exchange rate.
Central Bank of Nigeria extends the deadline for the return of old series of 200, 500 and 1000 naira notes from January 31, 2023, to February 10, 2023, to allow for the collection of more old notes…https://t.co/HkT4ES90vK pic.twitter.com/hrdS4bJqbe
— Central Bank of Nigeria (@cenbank) January 29, 2023
It represents a 63% premium against the market price of BTC at $23,603. However, reportedly, a majority of the Nigerian populace only has access to the black market dollar rate, which is around 700 Naira to a dollar. This is the same dollar-equivalent price displayed on most crypto exchanges in the country, including Binance and Bybit.
The exchange rate on LocalBitcoins has reached a whopping $62,000, marking a significant premium of 162%. The central bank issued a notice restricting cash withdrawals last month. The maximum cash withdrawal over the counter (OTC) per week was capped at 100,000 NGN for individuals and 500,000 NGN for corporations.
Citizens were allowed to withdraw a maximum of 20,000 ($43.4) NGN in a day with a weekly cap of 100,000 ($217) NGN. These restrictions came into effect earlier this month on 9 January, just before the circulation of new Naira banknotes. Speculations took the front seat while some stated that the government’s decision was aimed at combating inflation and money laundering.
Citizens initially had until 31 January to exchange their old banknotes for new ones, but the deadline has been pushed to 10 February. The development comes as demand for the leading digital asset has continued to increase in Nigeria due to the government’s decision to impose limits on banks and ATM cash withdrawals in an effort to achieve a cashless economy.
Meanwhile, this is not the first time bitcoin has traded at a premium in Nigeria. In early 2021, when the central bank prohibited financial institutions from providing services to cryptocurrency exchanges, BTC traded at a 36% premium.
Following the Nigerian government’s move to achieve a cashless economy, thereby limiting the availability of cash, there has been a growing interest in BTC among Nigerians in recent months.
According to data from the analytics platform Google Trends, investors in Nigeria are becoming more interested in purchasing bitcoin than investors in the United States.
#Bitcoin is Hope‼️
BREAKING: 🇳🇬 Bitcoin is selling for a 60% premium in Nigeria (37,235 USD) because of increased demand.
🇳🇬 Central Bank of Nigeria started limiting cash withdrawals to $44 per day earlier this month.
Now leads the world in Google searches for "Buy #Bitcoin " pic.twitter.com/SI861WUhVy
— SHIB Bezos (@BezosCrypto) January 29, 2023
In December, the Nigerian central bank imposed a weekly limit of 100,000 nairas ($217) and 500,000 nairas ($1,085) withdrawals on individuals and corporate organizations, respectively. The bank added that withdrawals above this limit would attract processing fees of 5% for individuals and 10% for corporate organizations.
At the same time, the regulator stated that it had set the maximum cash withdrawal per week via ATM at 100,000 nairas ($217), subject to a maximum of 20,000 nairas ($43) cash withdrawal per day. The policies became effective on January 9, 2023.
This is not the first time the Bitcoin premium has surged in Nigeria. In February 2021, the central bank prohibited regulated financial institutions from providing services to cryptocurrency exchanges. This decision led to a 36% increase in BTC premium at the time.
Moreover, earlier this month, the Nigerian Central Bank published a report outlining the regulatory framework for stablecoins and initial coin offerings (ICO) in the country. However, most of the content pertained to the eNaira, Nigeria’s Central Bank Digital Currency (CBDC).
Despite becoming the first African country to launch a CBDC in October 2021, Nigerians declined to adopt the central bank’s initiative.
Interestingly, the Central Bank recorded 270,000 eNaira wallets in August 2022. However, it was found that Nigerians preferred to transact using stablecoins like Tether [USDT]. But with the cashless policy in sight, the nation’s financial regulator would hope citizens increase the eNaira usage.