06-30-2019 icon

Can Bitcoin be Used in Nigeria to Fight Inflation?

By Bitcoin Nigeria
naira inflation

Cryptocurrency trading and investing in Nigeria is booming. Surveys have shown that 51% of Nigerians see Bitcoin and other cryptos as an investment, Moreover, this is predominantly due to Naia exchange rates which see many Nigerians successfully use Bitcoin to protect savings from inflation.

Is Using Nigerian Cryptocurrency Exchanges a Valid Way to Fight Inflation?

Inflation in Nigeria is out of control. Inflation currently stands at approximately 11.25%. By comparison, inflation in Eurozone countries like Germany presently stands at just 1.7%. This means that Nigerians constantly have to struggle with surges in food and fuel prices. However, several Nigerians are already using Bitcoin to make life more bearable.

How Inflation Works

As soon as fiat cash is issued by central banks anywhere in the world, it starts to lose value. This is because more cash can be printed and put into circulation at any time.

Since 2014, Nigerian Naira has lost almost 50% of its value compared to the U.S. Dollar.

As Nigeria imports 80% of essential goods, Nigeria has to borrow and print money to keep the economy moving. However, every new Naira note printed diminishes the value of the Naira further.

By comparison, Bitcoin is a deflationary form of currency. Naira in your pocket today will decrease in value tomorrow. Conversely, Bitcoin will likely increase in value. This is because Bitcoin has a fixed supply and cannot be minted on demand. Instead, the number of new Bitcoin entering circulation is reduced over time.

Bitcoin to Naira Price Performance Examples

To demonstrate how Bitcoin can be used to combat inflation, it is necessary to look at historical Bitcoin price data.

  • In 2014, Bitcoin fluctuated in value from between $300 to $400 (USD) per coin.
  • By the end of 2016, Bitcoin was priced at almost $700
  • Today, Bitcoin is priced at over $8,000

Over the same 5-year period the Nigerian Naira has halved in value.

Is Using a Bitcoin to Combat Inflation High-Risk?

In the long-term, Bitcoin has proven that it increases considerably in value on an almost consistent basis. However, Bitcoin price volatility has seen Nigerians who have entered the market at the wrong moment, make considerable losses.

In 2017, the Bitcoin price rose as high as $19,000, before eventually correcting all the way back to $3,500. Bitcoin is not, therefore an ideal cryptocurrency to invest in for the short-term. Long-term investors, on the other hand, can make thousands of dollars in profit, by buying Bitcoin to hold for anywhere from 3 to 5 years or more.

Is Now a Good Time to Invest in Bitcoin?

In May 2020, the amount of new Bitcoin entering circulation each day will be reduced by 50%.

During past Bitcoin halving events, the Bitcoin price has risen sharply as a result. Many, therefore, believe that now in 2019 is an ideal time for Nigerians to invest in Bitcoin. Investors who do, though, will remember not to invest recklessly, by investing more than they can afford to lose.