Over the past few weeks, reports have surfaced that cryptocurrency users in Nigeria have been buying bitcoin (BTC) for quite a hefty premium. On the surface, these reports may appear to be accurate, but they are essentially wrong, and this report will address how.
Nigerians Are Not Buying Bitcoin For $34,000
Reports that have emerged claim that Nigerians are currently buying bitcoins at a price of $34,000. These reports factor in the fact that the digital asset is currently selling for over 17 million Nigerian Naira on P2P platforms (which, by the way, is the only way Nigerians can buy and sell cryptocurrency), but then use the official central bank rate of $1 to 459.89 Naira to arrive at the figure of $34,000.
Now, as mentioned above, this may seem correct on the surface, but it is not, and that is because there are currently two different types of US dollars in the country. The central bank rate and black market rates differ widely.
As of February 1, the black market rate for the US dollar to Naira is around 750, which is what the general population of the country uses. If the BTC price is converted using the official central bank rate, then it is in the $34,000 figure. But since citizens literally cannot obtain dollars in the country except for official purposes and international school fee payments, and even then it can be a nightmare, the black market rate is what the country’s residents seek.
Using this black market rate, you will arrive at the same figure as everyone else: the figure around $22,900 that the digital asset is trading at. Also, you sell your tokens at the same dollar exchange rate you buy them at, not the CBN dollar exchange rate.
BTC price recovers above $23,000 | Source: BTCUSD on TradingView.com
So do Nigerian residents pay a high premium to buy bitcoin? No. Rather they are paying a high premium to buy the US dollar. This premium over the US dollar affects the buying and selling rate of everything in the country and bitcoin is no exception.
As for the claims that the bitcoin price recently rose more than 50% above the general market price, they are wrong. Bitcoin has always been traded in the country at the price of the black market dollar, so this is also not a new phenomenon by any means.
The only thing that could have triggered the cash withdrawal limit in the country is the increased adoption of cryptocurrencies. There was no sudden 50% increase in the bitcoin price in the last few days.
