As the Nigerian Naira struggles against the US dollar, bitcoin is making headlines. It's rallying and getting close to its All-Time High (ATH) of $73,737 from April. In Nigeria, bitcoin has already hit its ATH, valued at ₦121 million.
The Naira has had a tough time finding stability. Despite some forex market reforms, like the free-floating of the currency, it hasn’t improved much. A report from First Securities Discount House (FSDH) Merchant Bank Ltd points out that increased foreign exchange inflows, driven by higher policy rates and more interventions from the Central Bank of Nigeria (CBN), might help.
Right now, the Naira sits at ₦1,711.774 per US dollar. This follows a steep 72% drop to $81 million in US dollar liquidity, according to Bloomberg. It’s the lowest level in months and the worst performance in weeks.
Additionally, a recent World Bank report, titled Africa's Pulse, highlighted that the Naira, along with the Ethiopian Birr and the South Sudanese Pound, ranks among the worst-performing currencies in Sub-Saharan Africa for 2024. The report attributes the Naira's 43% year-to-date depreciation mainly to increased demand for the dollar, limited liquidity, and delays in forex disbursements from the CBN.
Meanwhile, bitcoin is building on its September gains. It’s inching closer to a new ATH, having appreciated about 12% in the last six months and 66% year-to-date.
Several factors are driving this rally. Market excitement is growing around a potential Trump victory in the upcoming US election and what that could mean for bitcoin, especially given his recent positive comments about it.
In Nigeria, high inflation and the Naira's ongoing decline make bitcoin an appealing option for many. The stark difference between bitcoin and the Naira positions the cryptocurrency as a safe haven for those facing economic challenges.
Furthermore, USDT has become a popular alternative to the Naira over the past year. Now, stablecoins account for 43% of crypto transaction volume in Sub-Saharan Africa, according to Chainalysis. As the Naira continues to fall and dollar liquidity tightens, many people are turning to USDT to access the limited USD for trade, savings, and international payments.
As the Naira keeps losing value against the dollar, it’s almost second nature for Nigerians to seek alternatives like bitcoin and USDT. Looking ahead to 2025, this trend will likely continue as long as the Naira faces challenges. More Nigerians are expected to pursue these alternatives for easier access to USD through USDT and to store wealth or make quick global payments with bitcoin.
However, the fourth quarter isn't over yet. There may be some relief for the Naira in the coming weeks as the government, especially the CBN, actively works on measures to tackle the current economic and currency issues.