When the senators of Nigeria and the authorities of the central bank of this country talk about Bitcoin (BTC) they see the straw in the other’s eye, but they do not see the beam that is in theirs. Recently, two facts pointed against the first cryptocurrency and the scope it has had as an alternative for the protection of value.
On February 5, the financial institution ratified a measure imposed in 2017 that prohibits related banking transactions with bitcoin. A week later the senators of the upper house of parliament debated BTC and the scope it has had in their territory.
Senator Sani Mohammed Musa said during his speech that bitcoin had made the national currency , the naira, “is almost useless or has no value.” Another senator, this time Tokunbo Abiru, stressed that it is “good to ban it” because of the challenges it has represented. The “challenges” to which the parliamentarian refers is that in the last five years BTC has served citizens to exchange millions of dollars.
The expansion that bitcoin has had since its activation in 2009 had little or nothing to do with the deterioration of Nigeria’s national currency. Although Musa’s argument portrays BTC as a “bad” actor that reduced power purchase of the Naira, the truth is that it has been the nation’s own political and economic conditions that have buried it.
Causes of the Naira debacle
It is three things that have really sunk Nigeria’s ailing currency: double-digit inflation, economic recession, and rising rates of corruption. Regarding the first element, it should be mentioned that the country shows one of the highest inflations in the world. Between 2005 and 2020, fluctuations have varied between 5.4% and 18% annually.
In 2019, Nigeria ranked 13th worldwide among the economies with the worst inflationary index, according to a ranking presented by the newspaper El País. In addition, a report released by Global Voices, in February of last year, pointed out that inflation would put pressure on purchasing power, without mentioning bitcoin as a possible cause of the loss of value of the currency.
“An inflation rate that bounces all over the place, like this one, is usually a sign of a struggling economy, causing prices to fluctuate and unemployment and poverty to rise,” highlighted a report by the research firm Statista.
The deterioration of the naira has also been punctuated by the economic recession. In 2016 the country entered a crisis due to the abrupt drop in oil prices. A barrel of crude went from 112 dollars in 2014 to about 50 dollars two years later. Now, in 2020 and due to the COVID-19 pandemic, the red numbers have returned. It must be remembered that oil production and export is one of Nigeria’s main sources of income. Currently, the country is producing 1.4 million barrels per day.
An article by the EFE news agency highlighted that the country’s Gross Domestic Product (GDP) fell 3.62% in the third quarter of 2020, after having dropped 6.1% in the second quarter. At the end of the cycle, the decline in the economy was around 4%.
As a third element that would have reduced the purchasing power of the naira is the increase in corruption rates, especially in the public sector . According to Transparency International, Nigeria ranked 152nd as one of the most corrupt countries on a global scale in 2019, according to its Corruption Perception Index (CPI).
Corruption in Nigeria is To such an extent that Transparency International pointed out that, although countries can improve their ranking in the CPI, in the case of Nigeria there is little promise that they can achieve it. From the above, the lack of commitment to reverse the situation can be deduced.
Rise of bitcoin in the markets
Accusing bitcoin of being responsible for the Nigerian national currency has lost its purchasing power is, at least, incorrect. For years the naira has experienced, to a greater or lesser extent, a periodic depreciation like many other national currencies.
The current bull run on bitcoin has shown that multiple of these currencies are not valuable and that they continue to lose ground. Governments will do everything in their power to defend their own interests and try to minimize what is causing them “noise.” The States have always assumed the monopoly of money and no authority likes the idea of having competition in this field.
Contrary to what the senators want to show, bitcoin has served as a safeguard of value to the people of Nigeria. A report published in December by qz.com reported that in the last five years 60,215 bitcoins were exchanged in the country, representing a value of about $ 3 billion at the current price. One of the most used platforms in Nigeria for swaps has been Paxful.
These types of figures show that the bans attempted by the central bank have not been effective. Contrary to what the financial institution intends, the bank has taken measures that, before canceling BTC, have further encouraged its use. An example of this occurred in December when the receipt of remittances with cash was restricted.
Another P2P exchange service for bitcoin in Nigeria, LocalBitcoins, shows that so far in 2021 they are traded weekly between 55 and 72 BTC. From the foregoing, it can be deduced that the authorities have not been able to eliminate operations related to cryptocurrencies since the same situation in the country leads them, in many cases, to use bitcoin.
The history of periodic depreciation of national currencies, such as that of Nigeria, has also occurred in Latin America. Venezuela and Argentina currently represent the most emblematic cases. CriptoNoticias reported in October last year that the devaluation in Venezuela and Argentina had triggered the price of bitcoin to a record level, measured in their currency. two countries.
Not all senators in Nigeria are against bitcoin, some also support its technology and bet on potential regulation in the future. However, rushing to say that BTC has caused the fall of the naira shows ignorance and wants to hide the true causes of a currency debacle that began years ago.
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