Nigeria’s Bitcoin Premiums: Stability of the Dollar, Not Crypto, Drives Demand
• Nigerians are paying a premium for the stability of the U.S. dollar, not bitcoin, according to an analyst
• Bitcoin premiums in Nigeria were attributed to cash withdrawal limits placed by the Nigerian government on its citizens
• The inflated bitcoin prices may not reflect a heightened demand for the asset but a continued demand for the U.S. dollar as the country’s local currency suffers
What is Bitcoin Premiums?
Nigeria’s bitcoin premiums – where the cryptocurrency was listed on local trading platforms for 60% above market prices – made headlines this week. Although the news was celebrated by the bitcoin community on social media, the inflated bitcoin prices may not reflect a heightened demand for the asset but a continued demand for the U.S. dollar as the country’s local currency suffers.
Why Is It Happening?
It all started when a number of media outlets drew attention to the high premiums, which they attributed to cash withdrawal limits placed by the Nigerian government on its citizens as it worked on swapping old bank notes for new ones. But if bitcoin demand went up as a result of this cash jam in Nigeria, then why did premiums stay constant?
What Caused The Premiums?
Conor Ryder, research analyst at digital asset data provider Kaiko looked into why this happened and found that „the premium didn’t substantially increase at all“ as a result of ATM limit order being imposed in early December last year. He believes that instead of reflecting an increased interest in buying crypto assets, these premiums reveal more about discrepancies between official and unofficial U.S. dollar exchange rates in Nigeria with traders favouring US dollars over other assets due to its stability and global acceptance.
Are Bitcoin Premiums A New Phenomenon In Nigeria?
No, Nigeria’s bitcoin premiums are not actually new and have been around since before December 2020 when ATM withdrawal limits were imposed in an effort to control currency devaluation problems plaguing Nigeria’s economy today yet still failing to make much difference due to their limited scope and reach within this vast nation state regionally divided both culturally and economically across its 36 states .