Naira lost N35/$1 on P2P trading in 10 days
The Nigerian naira currency has fallen on Binance’s P2P trading platform due to the country’s deteriorating economy and drop in FDI.
The USDT/NGN pair traded at N737 to $1 on Saturday, compared to N702 on April 10. This marks a spread of N35 in just 11 days.
Like many emerging economies, Nigeria faces significant economic challenges that have led to the collapse of its currency. One of the major challenges is inflation.
According to the recent data, headline inflation rose to 22 per cent in March this year, with last month’s inflation rate rising by 0.13 per cent. Analysts caution that the actual inflation rate is likely higher than official figures.
Inflation in Nigeria is expected to continue to rise, as the new president vows to end energy subsidies, which have led to some of the lowest fuel prices in recent years.
Meanwhile, FDI has dried up amid global financial constraints, with foreign investors earning over a four per cent yield by purchasing short-term government bonds.
Recent data also suggest that FDI in Nigeria will decline to $5.3 billion in 2022, compared to $6.7 billion previously. This is due to the naira’s depreciation, weak government economic policies, and pre-election uncertainties.
The decline of the naira has significantly impacted Nigerian savers, who have seen their investments significantly lose value. Many Nigerians are turning to stablecoins as an alternative investment option to mitigate this.
Stablecoins are digital tokens that are designed to maintain a stable value relative to a specific asset, such as the US dollar. They are often used as a way to transfer value between cryptocurrencies, without being exposed to the price volatility that is typical of most cryptocurrencies.
For Nigerians, stablecoins offer a way to keep their money on track and their savings safe, while other cryptocurrencies and fiat currencies such as the naira experience significant price volatility. Examples of stablecoins include Tether (USDT), USD Coin (USDC), and Binance USD (BUSD), all of which are available on Binance.com.
Cryptocurrency exchanges allow users to buy, trade, and spend stablecoins, and some even offer interest on savings. This makes stablecoins an attractive alternative to traditional savings accounts, which offer low-interest rates that do not keep up with inflation.
In addition to offering protection against inflation, stablecoins also have a borderless feature that makes transactions easy and convenient, with very low transaction fees. They are open to all generations, including tech-savvy Nigerian youth, who are increasingly turning to digital assets as a way to invest and save.
Finally, stablecoins do not have a central authority that can breach payments, which provides an added layer of security for users. As more major brands embrace cryptocurrencies, digital users in Nigeria and worldwide have access to more locally and globally recognized brands.
