Why Crypto black market is thriving in Nigeria
- 22nd February 2021
- Posted by: Hakeem
- Category: Crypto
It’s been about two weeks since Nigeria’s Apex bank prohibited regulated financial institutions from dealing with Cryptos or face the wrath. At the fear of Nigeria’s Central Bank, financial institutions immediately began to close crypto-related firms.
In the wake of such a ban, the demand for Bitcoin by Nigerians had exponentially grown so much that it outstrips the African continent.
According to a recent study seen by Bigwig FX, data retrieved from Usefultulips (a Bitcoin analytic data provider) revealed that the use of Bitcoin for peer-to-peer lending in Nigeria surged by 16% since the CBN directive took effect about 17 days ago.
Such high demand for Bitcoin by a growing number of Nigerians has led the unofficial crypto market popularly known as the black crypto market to thrive.
A recent study by Bigwig FX reveals Nigerians are made to cough a hefty premium on Bitcoin, as recent macro reveals Bitcoin goes for as high as about $75,000 a premium of 36% through these dark channels.
This has caused high discontent and increased the complexity in making Bitcoin transactions through the naira. This is particularly prevalent among a significant proportion of young Nigerians because payment partners that transact with the local currency are no longer willing to deal with Crypto exchanges due to the directive of the Central Bank of Nigeria, putting an indefinite pause on naira deposits to exchanges.
As a result of such an update, local-based crypto exchanges started experiencing liquidity challenges in processing local transactions, as they were virtually cut off from Nigeria’s financial ecosystem triggering a big gap between the Bitcoin price in Nigeria and that across global exchanges.
The recent CBN directive has already strengthened fears among a growing number of Nigerian users that include millennials and small business operators that use such digital assets for payments and hedge against fiat inflation.
Nigeria’s highly young population (data retrieved from the CIA factbook show more than 90% of Nigerian citizens are within the age of 0-54), coupled with its fast-rising internet adoption and smartphone penetration, had provided the synergy for many young Nigerians to stay atop with Bitcoin.
Ray Youssef, the co-founder of Paxful in an exclusive interactive session on the Bigwig FX Crypto program via Clubhouse buttressed that Nigerians over the years have shown a consistent passion for the world’s most popular crypto asset largely being attributed to the ease it brings when making payments for goods and services.
Recent information reaching Bigwig FX, reveals leading crypto exchanges are endlessly working on solutions that will curb the high premium Nigerians pay through such channels, as some of them retool their services to include Peer to Peer trading in the case of Patricia.
Nigerian-based crypto exchange Buycoins, some days ago via Twitter, announced that its customers could buy their bitcoin through a newly designed crypto-asset that bridges the Naira thus offering the advantages of decentralized blockchain.
In addition, the world’s largest crypto exchange, Binance recently rolled out new services to enable compliant bitcoin trading in Nigeria. It features the introduction of a new trading pair (NGN/NGN Fiat) and Express mode.
Bottom line: Leading Crypto pundits are therefore not surprised that Africa’s biggest crypto market is not giving up on bitcoin and thus ready to pay a premium to hold on to the asset, irrespective of the Central Bank’s ban.