Economy
Nigerians Defy Central Bank, Flock to Bitcoin
By: Gerelyn Terzo of Sharemoney
Bitcoin, the leading cryptocurrency, has seen its value balloon by more than 100% year-to-date, soaring to an all-time high of more than USD 60,000.
Nigerians, many of whom are battling poverty, would be hard-pressed to miss out on those gains. This is especially true considering that the unemployment rate in the most populous African nation was 33.3% as of last quarter, with more than 23 million Nigerians out of work.
Enter bitcoin, which has been a safe-haven investment as well as a faster and cheaper payment method for the growing segment of the population that is catching on.
In fact, Nigeria last year rose to the top of the heap for bitcoin trading at $400 million in volume, surpassing transactional volume in nearly every other jurisdiction — with the exception of the United States and Russia — as traditional asset classes lose their appeal in comparison and the local currency, the naira, remains under pressure.
Nearly one-third of Nigerians who participated in a Statista poll said that they used or owned cryptocurrencies, more than any other country represented in the survey.
Source: Statista
Nigeria also stands out in all of Africa, as the top peer-to-peer bitcoin trading nation on the continent based on bitcoin trading volume.
Nigeria’s P2P BTC trading volume surpassed USD 99 million in the first quarter of 2021. Kenya is a distant second at $34.8 million followed by Ghana and South Africa at $27.4 million and $25.8 million, respectively.
Source: Business Insider/Useful Tulips
The robust bitcoin trading activity in Nigeria has earned the country the title of Africa’s Bitcoin Nation. A 27-year-old Nigerian office worker who was spotlighted by the AFP, Chigoziri Okeke, described how he first invested in cryptocurrencies five years ago with the intention of just making a payment.
When his crypto wallet’s value increased by 10% in a few short days, however, he was hooked and started directing a percentage of his salary toward the market. Today, this investor’s crypto portfolio is worth USD 50,000, comprising various digital assets.
In addition, Google searches of bitcoin in Nigeria surpass that of any other jurisdiction, according to Nairametrics.com. Bitcoin appeals especially to the West African nation’s millennial generation, who are looking to the flagship cryptocurrency as a store-of-value asset as well as a way to circumvent the hoops they must jump through to open a traditional investment account.
With the bitcoin price most recently hovering at USD 60,000, Nigerians have reason to be excited. At this price, one bitcoin could reportedly buy someone a three-bedroom apartment in Lagos’ Ajah neighbourhood.
Unstable Fiat Currency
A big part of bitcoin’s popularity is due to Nigeria’s unstable naira. The International Monetary Fund (IMF) has drawn a line in the sand, stating that Nigeria’s fiat currency is “overvalued” by more than 18%. The IMF wants Nigeria to devalue its fiat currency, but the African nation’s government has said no way.
Nigerian President Muhammadu Buhari blames “global outflows” triggered by COVID-19 for the unstable naira and believes that devaluing it further after doing so twice in 2020 would only exacerbate the already sky-high inflation rate, which is currently in the double-digits at more than 17%. This would weaken Nigerians’ purchasing power even more. Nigeria’s central bank slashed the naira’s value by close to one-quarter last year.
Meanwhile, not only has bitcoin been generating returns hand over fist, but it has also been thrust into the global spotlight amid the SARS-related protests in Nigeria.
According to reports, Nigeria thwarted financial payments toward police brutality protests, which only led the supporters to donate bitcoin instead. Twitter and Square CEO Jack Dorsey backed this movement, which only brought more attention to the country and cryptocurrencies.
Source: CoinGecko/TradingView
Mixed Signals
Nigeria’s central bank has been highly critical of bitcoin, warning as recently as February that “cryptocurrencies are largely speculative, anonymous and untraceable.”
Nonetheless, the Central Bank of Nigeria can’t stop the population from accessing the flagship cryptocurrency, thanks to the peer-to-peer nature of bitcoin, which was inherently designed to circumvent third-party service providers like banks.
Bitcoin creator Satoshi Nakamoto, whose real identity remains a mystery, defined the first cryptocurrency in the whitepaper, which was published in 2008, saying:
“A purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution.”
The Central Bank of Nigeria has since backtracked from its remarks slightly, maintaining that it has not placed a blanket ban on cryptocurrency trading. It is a tangled web, however. The central bank instead said that it is doubling down on a 2017 law that bans institutions supporting cryptocurrency transactions.
Even though institutions might be banned from supporting cryptocurrency trading, individuals are still free to trade them. The central bank is sending mixed signals, to say the least, as local banks were instructed by the central bank to refrain from doing business with customers who transact in cryptocurrencies.
“The CBN did not place restrictions from use of…cryptocurrencies and we are not discouraging people from trading in it. What we have just done was to prohibit transactions on cryptocurrencies in the banking sector,” stated Adamu Lamtek, according to Decrypt, citing Today NG.
Since the restrictions were imposed on Nigeria’s crypto trading industry, rather than disappearing, the industry has flexed its muscle for its nimble nature. In a few short months, they have been quick to build P2P exchanges that circumvent the crypto ban on financial institutions.
The restrictions have funnelled more activity to over-the-counter (OTC) venues while a makeshift P2P market is similarly expanding. Danny Oyekan, the founder of global social payments application Coins App, is cited by Decrypt as saying,
“So basically, the ban only forced the fiat channels underground.”
Source: Twitter
In Nigeria, cryptocurrencies are regulated by the country’s own Securities and Exchange Commission, which last year stated that it would classify cryptocurrencies as securities unless they are proven otherwise by the asset’s issuer or sponsor. In February, Nigeria’s SEC said that crypto regulation was going to be placed on the back-burner amid the central bank’s crypto crackdown.
Despite the uncertainty, Nigerians are showing no signs of relenting in their pursuit to own bitcoin and are increasingly relying on P2P trading platforms to do just that.
By Dipo Olowookere
About 0.04 per cent was recovered on Friday from the loss recorded by the Nigerian Exchange (NGX) the previous due to profit-taking.
Yesterday, investors were in the market with renewed vigour, mopping up stocks trading at relatively cheaper prices.
According to data, the insurance counter gained 0.41 per cent, the banking sector appreciated by 0.38 per cent, and the consumer goods index grew by 0.14 per cent.
The gains achieved by these three sectors were enough to lift Customs Street at the close of business despite the 0.26 per cent decline printed by the industrial goods segment and the 0.14 per cent loss suffered by the energy industry. The commodity counter was flat during the session.
A total of 43 equities gained weight on the last trading day of this week, while 26 equities shed weight, indicating a positive market breadth index and strong investor sentiment.
Red Star Express increased its share price by 10.00 per cent to N13.20, NCR Nigeria grew by 9.97 per cent to N128.55, SCOA Nigeria inflated by 9.96 per cent to N14.90, Omatek appreciated by 9.94 per cent to N1.77, and Deap Capital expanded by 9.85 per cent to N4.46.
On the flip side, McNichols decreased by 8.81 per cent to N6.00, Legend Internet crumbled by 7.56 per cent to N5.50, Cornerstone Insurance crashed by 6.48 per cent to N6.35, C&I Leasing contracted by 6.29 per cent to N8.20, and Austin Laz slipped by 5.78 per cent to N3.75.
Yesterday, 539.9 million shares valued at N16.7 billion were transacted in 48,023 deals versus the 1.0 billion shares worth N31.6 billion executed in 51,227 deals in the preceding day, implying a shrink in the trading volume, value, and number of deals by 46.01 per cent, 47.15 per cent, and 6.26 per cent apiece.
Zenith Bank was the most active for the day with 54.6 million stocks sold for N3.8 billion, Jaiz Bank traded 41.5 million units worth N359.4 million, Secure Electronic Technology transacted 37.7 million units valued at N39.2 million, Access Holdings exchanged 30.5 million units for N699.2 million, and Lasaco Assurance transacted 27.2 million units worth N68.3 million.
When the market closed for the day, the All-Share Index (ASI) went up by 72.21 points to 166,129.50 points from 166,057.29 points and the market capitalisation gained N31 billion to N106.354 trillion from N106.323 trillion.
By Adedapo Adesanya
It was a positive ending for the Naira this week after it further appreciated against the US Dollar in the Nigerian Autonomous Foreign Exchange Market (NAFEX) on Friday, January 16 by N1.33 or 0.09 per cent to sell for N1,417.95/$1 compared with the previous day’s N1,419.28/$1.
The domestic currency also gained N2.41 against the Euro in the official market to close at N1,647.51/€1 versus the preceding session’s closing price of N1,649.92/€1, however, it suffered a N7.97 loss against the Pound Sterling in the same market window to trade at N1,901.32/£1, in contrast to Thursday’s closing price of N1,893.35/£1.
In the same vein, the Nigerian Naira depleted against the Dollar at the GTBank FX counter by N2 to quote at N1,427/$1 compared with the previous day’s N1,425/$1, but strengthened against the greenback at the black market yesterday by N5 to settle at N1,485/$1 versus the N1,490/$1 it was exchanged a day earlier.
Improved supply conditions helped keep the market within range as exporters’ and importers’ inflows in addition to non-bank corporate supply enhanced liquidity as the Central Bank of Nigeria (CBN) made no visible intervention.
Stronger external inflows from foreign portfolio investors (FPIs) and improving current account dynamics, continue to align with structural support in the wider economy.
Nigeria has seen projections of a stronger economic or gross domestic product (GDP) growth and lower inflation in 2026, with these forecasts citing improved macroeconomic fundamentals and reform impacts.
As for the cryptocurrency market, it was mixed following selloff in precious metals and lower US stocks appeared to be denting crypto sentiment.
Gold and silver, both of which also enjoyed big rallies earlier this week, tumbled 1.2 per cent and 5 per cent, respectively while key US stock indexes — the Nasdaq, S&P 500 and Dow Jones Industrial Average — all reversed from early gains to modest losses in Friday trade.
Dogecoin (DOGE) shrank by 2.2 per cent to $0.1370, Ripple (XRP) slipped by 0.8 per cent to $2.05, Ethereum (ETH) went down by 0.7 per cent to $3,228.56, and Bitcoin (BTC) slumped by 0.6 per cent to $95,086.80.
Conversely, Litecoin (LTC) appreciated by 3.2 per cent to $74.48, Solana (SOL) rose by 0.4 per cent to $143.70, Cardano (ADA) jumped by 0.2 per cent to $0.3942, and Binance Coin (BNB) increased by 0.1 per cent to $935.88, while the US Dollar Tether (USDT) and the US Dollar Coin (USDC) remained unchanged at $1.00 each.
By Adedapo Adesanya
Oil prices settled higher amid lingering worries about a possible US military strike against Iran, a decision that may still occur over the weekend.
Brent crude settled at $64.13 a barrel after going up by 37 cents or 0.58 per cent and the US West Texas Intermediate (WTI) crude finished at $59.44 a barrel after it gained 25 cents or 0.42 per cent.
The US Navy’s aircraft carrier USS Abraham Lincoln was expected to arrive in the Persian Gulf next week after operating in the South China Sea.
Market analysts noted that it doesn’t seem likely anything will happen soon. However, the weekends have become the perfect time for actions so as not offset the markets.
The market had risen after protests flared up in Iran and US President Donald Trump signalled the potential for military strikes, but lost over 4 per cent on Thursday as the American president said Iran’s crackdown on the protesters was easing, allaying concerns of possible military action that could disrupt oil supplies.
Iran produces approximately 3.2 million barrels per day, accounting for roughly 4 per cent of global crude production, so it was not a coincidence that markets rallied sharply through Tuesday and Wednesday as President Trump canceled meetings with Iranian officials and posted that “help is on its way” to Iranian protesters, raising fears of potential US military strikes that sent prices surging toward multi-month highs.
Weighing against those fears are potential supply increases from Venezuela.
The Trump administration is exploring plans to swap heavy Venezuelan crude for US medium sour barrels that can actually go straight into Strategic Petroleum Reserve (SPR) caverns, since not all all oil belongs in the reserve.
According to Reuters, the Department of Energy is considering moving Venezuelan heavy crude into commercial storage at the Louisiana Offshore Oil Port, while US producers deliver medium sour crude into the SPR in exchange.
Analysts expect higher supply this year, potentially creating a ceiling for the geopolitical risk premium on prices.
Some investors covered short positions ahead of the three-day Martin Luther King holiday weekend in the US.
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