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HomeTop NewsHow trading in crypto, assets hedge push Nigeria's naira to record low

How trading in crypto, assets hedge push Nigeria’s naira to record low

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Nigerians accumulating cryptocurrencies to shield assets against a flagging naira have contributed to the fiat currency’s plunge to record lows in the unofficial market, according to a Bloomberg report.

Nigerian naira currency weakened further on Wednesday at the unofficial market, as it was quoted N710 to the greenback, down from N672 to the US dollar, traders said.

However, the local currency appreciated at the I&E FX market by 0.23 per cent to N430.00 as against the last close of N431.00.

Africa’s largest economy operates a multiple exchange rate regime dominated by an official rate strictly administered by the Central Bank of Nigeria (CBN). There is also an unauthorized parallel market where prices are largely determined by supply and demand, more fairly reflecting the value of the naira.

A third, the crypto exchange rate, has emerged as Nigerians increasingly accumulate digital assets due to scarcity of local currency from official sources, compounded by three devaluations since 2020.

More and more people are buying cryptocurrencies because they are losing faith in the naira, the president of the Association of Bureau de Change Operators of Nigeria (ABCON), Aminu Gwadabe said over the phone. “The USD rate on the crypto floor is used to determine the value of the local currency,” Gwadabe said.

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While financial institutions are banned by the central bank from allowing cryptocurrency trading in Africa’s largest economy, many Nigerians are still exchanging digital currency on the peer-to-peer market, where transactions are settled in dollars.

The greenback traded at N687.6 on peer-to-peer transactions on Wednesday, according to live data on the website of Binance Holdings Ltd., the world’s largest crypto exchange, an indication that the naira is trading on the unauthorized market could weaken further.

People are buying dollars to buy digital assets, Gwadabe said. “The USD buy rate on the crypto floor is moving in tandem with the local rate,” he said.

The Binance platform shows that Nigerians had made $103,691 worth of digital currency transactions in 24 hours as of 10:36 a.m. local time on Wednesday in Lagos.

Nigerians traded $185 million worth of bitcoin on the platform in the first three months of the year, accounting for a quarter of transactions during that period on Paxful, a crypto trading platform.

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