According to a website that tracks the price of bitcoin across the globe, the crypto asset’s selling price in Nigeria as of February 18 stood at $ 76,000. At this price, the crypto asset is selling for $20,000 more than the approximately $52,000 that most cryptocurrency exchanges are currently quoting.
The Impact of the CBN Crypto Order
This spike in the premium charged on bitcoin follows the recent Central Bank of Nigeria (CBN) directive that targets cryptocurrency traders and exchanges. According to the CBN order, which became effective on February 5, banks and other financial institutions were asked to end relationships with entities that are associated with cryptocurrencies. Since then, many crypto exchanges have seen activity drop drastically as institutions complied with the directive.
News.Bitcoin.com reached out to Chiagozie Iwu, the CEO at Naijacrypto cryptocurrency exchange for his perspective on the surging premium. Iwu starts by confirming that different exchanges have different prices for BTC, and he says this has been necessitated by increased costs of acquiring crypto assets. Before CBN issued the directive, “all crypto exchanges had a unified liquidity source” and this source ensured that getting “naira against crypto was easy.”
However, after financial institutions began implementing the CBN order, the liquidity situation has changed for the worse. As Iwu explains, prior to the CBN order:
Trading in Nigeria was smoother than ever, all exchanges had unified liquidity and the markets were very liquid. There was basically little to no spreads in the market.
As a result of the changes in the liquidity situation, the gap between the BTC price in Nigeria and that across global exchanges has been widening.
Regarding the price disparities, the Naijacrypto CEO says these reflect the cost of getting the naira currency to exchanges. This increased cost, in turn, eliminates any arbitrage opportunities that might exist as a result of the price differences. However, Iwu does concede that for users with “better access” these arbitrage opportunities are real and can be exploited.
Turning to the impact of the CBN order, Iwu also explains how this has badly affected the operations of his company. According to the CEO, deposits on the Naijacrypto exchange dropped by 80% on the day the announcement was made. Before the CBN directive, crypto exchanges had arrangements with banks that enabled “automated deposits” as well as “easy withdrawals.” While activity has since picked up, Iwu reveals that deposits are still 20-25% lower than their usual levels.
The CEO also observes how this CBN order appears to be affecting locally established exchanges more than it has those based outside Nigeria. In explaining this observation, Iwu said:
For the foreign cryptocurrency exchanges its been different since they do not operate from Nigeria so they can flout laws.
Meanwhile, despite the CBN order, which has sent the Nigerian crypto industry back to the “Wild West”, Iwu says he is hopeful that “the ban will be lifted and things will be better than before.”