The Official Exchange Rate for Naira to Dollar Ended the week at at N1,665.50 per dollar amid demand pressure and a decline in forex

 

Creators of cryptocurrencies anticipated resistance to their operations from the start, its transactions with the Naira are under scrutiny.

They developed technology to safeguard their assets from regulation and seizure, regardless of the jurisdictions they operated in. With no central authority overseeing them and bypassing banks for transaction verification, cryptocurrency platforms pose significant risks to the economies they operate in.

Since the launch of Bitcoin in January 2009 by an individual or group known as Satoshi Nakamoto, cryptocurrency trading has thrived, often at the expense of the economies they operate in.

In Nigeria, the Central Bank and security agencies are concerned about the role of cryptocurrency traders in manipulating exchange rates.

Apart from other factors contributing to the depreciation of the Naira, such as rising import bills and spending on medical treatment and education abroad, manipulation of exchange rates by cryptocurrency traders is a significant factor. Traders artificially inflate exchange rates, leading to a depreciation of the Naira.

The depreciation of the Naira, observed at N1,750 to the dollar in the parallel market and N1,665 in the official market, is attributed to the actions of cryptocurrency traders who establish misleading exchange rates for the unsuspecting public.

According to experts, numerous manipulators operating through different channels are intensifying the decline of the Naira, contributing to inflation and economic instability.

Rume Ophi, the Founder of Cryptopreacher Blockchain Academy (CPBA) and a co-founder of ThinkCrypto Global in Washington DC, revealed that certain crypto traders with significant liquidity set selling rates well above market rates. Over time, these inflated rates become normalized, leading to the depreciation of the Naira.

For example, if the Naira is trading at N1,700 to the dollar, a cryptocurrency seller may introduce substantial funds and fix the rate at N1,800 to the dollar, surpassing the market rate by N100.

Ophi explained that individuals without the intention to buy at such rates might agree to the purchase, but at the payment stage, they cancel the offer. This activity, over time, establishes itself as the actual exchange rate for the Naira.

He emphasized that such operators aim to elevate dollar prices for personal financial gain or significant profits from transactions. Ophi noted that the beneficiaries of currency manipulation also have families who are impacted by the surge in commodity prices resulting from these actions.

In response to these challenges, Ophi proposed capping crypto trading rates, advocating for sensitization to encourage platform operators to set limits. He suggested that this would provide a framework for individuals transacting on these platforms, limiting the rates they can quote and buy.

Additionally, Ophi highlighted that Bureaux de Change (BDC) regularly refer to platforms like Binance for rates to benchmark the Dollar-to-Naira exchange rate. He pointed out that Binance's rate provision influences the rates marked up by many BDCs, contributing to the current state of the Naira. However, he acknowledged that not all operators in the crypto industry adhere to best practices.

According to him, the value of the Naira is more speculative than driven by the forces of demand and supply.

Dr. Aminu Gwadabe, the President of the Association of Bureaux De Change Operators of Nigeria (ABCON), clarified that in cryptocurrency trading, Bitcoin (BTC) is exchanged as USDT, which is pegged at one US Dollar. He explained that for USDT to be profitable, the Naira must depreciate, as crypto traders receive more Naira when they sell. During crypto trading, a trader's Naira accounts are debited, and their wallets are credited with an equivalent amount in USDT.

Gwadabe highlighted that the Naira is losing value due to a large volume of the local currency being traded on a virtual platform, and the earnings remain virtual. He noted that cryptocurrency market activities are unregulated and lack operational frameworks. In countries facing currency troubles due to cryptocurrency activities, the government can mobilize secret traders to quote cheaper rates, positively influencing the domestic currency. Crypto traders, according to Gwadabe, are contributing to the depreciation of the Naira.

Rume Ophi, Founder of Cryptopreacher Blockchain Academy (CPBA), explained that the adoption of cryptocurrencies is higher in developing countries like Nigeria, driven by inflation concerns. He urged the Nigerian Senate to establish an independent panel to create a legal framework for cryptocurrency regulation, similar to the approach taken by the US Senate.

Ophi emphasized the need for dialogue between stakeholders in the crypto space and lawmakers to explore how Nigeria can benefit from cryptocurrency. He pointed out that countries like Peru, India, Indonesia, and Nigeria have witnessed significant increases in crypto wallet creation.

Crypto traders can buy or sell any currency at a rate of their choice by placing requests and selecting the best offers from multiple waiting offers. Statistics indicate that consumers in Africa, Asia, and South America are more likely to own cryptocurrencies in 2023 compared to the United States.

In 2021, the US Congress established a committee hearing on digital assets and the role of government, while the Nigerian government is working on blocking online platforms like Binance, accusing them of Forex market manipulation and illicit funds movement leading to the depreciation of the Naira.

The continuous depreciation of the Naira has prompted the government to consider measures to close loopholes that undermine the local currency. The government's actions against Binance and other crypto firms are driven by concerns of currency speculators and money launderers using these platforms for criminal activities.

Binance, a digital assets platform, has adjusted its trading operations in response to unusual currency movements. Analysts recommend that the federal government block online cryptocurrency platforms to curb continuous Forex market manipulation and bring stability to the Naira.