SG Kinsmann · February 2, 2017 · 11:00 am

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This case-study will focus on Bitcoins rise in Nigeria. It was partially inspired byaquestion from

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This case-study will focus on Bitcoin’s rise in Nigeria. It was partially inspired by a question from Bloomberg’s Joe Weisenthal about what benefits does Bitcoin bring to people living amid a currency crisis. 

 Economies with Currency Black Markets


Recent History of Nigerian Naira

Throughout 2015  and the first half of 2016 the Nigerian monetary authorities pegged the NGN at an artificially strong rate of 200 Naira to the USD above the free market equilibrium rate. As a result, a black market for hard currencies (the USD, GBP, EUR, etc.) developed.

As a result the authorities allowed a large devaluation of the Naira in June 2016. However, the official Naira market was not abandoned entirely to a free float. The Central Bank continued to peg the USD/NGN at a new, cheaper rate and so the black market remained.

The premium on USD sold in the black market is the gap between the blue line and the white (spot) line in the chart below. The June 2016 devaluation decreased that premium but did not erase it. The premium continued to grow thereafter.

Remittance Options

This is the scenario for millions of Nigerians. You are a Nigerian working abroad with family back home to whom you wish to remit money. You are earning USD, EUR, GBP, ZAR, or other relatively hard African currencies in neighboring countries. So how does one remit USD and get the best return in NGN?

1. Western Union

USD $100 =NGN 33,750

The Sender sends USD but the Receiver cannot withdraw USD from the local Western Union office — they may only withdraw NGN.

These are the rates for USD remittances sent to Nigeria by Western Union. USD $100 buys 37,500 gross. Of course, there will be hefty Western Union fees in addition, about 10% of the sum, so the family receives 90% of NGN 37,500 = NGN 33,750

2. Bank Wire

USD $100 = NGN 32,000

When sending USD to your family in Lagos, for example, they are again unable to withdraw USD banknotes from the Nigerian bank. They can withdraw NGN from ATMs at the rate of $1 = NGN 320. This is worse than Western Union. Again there will be substantial additional fees to pay by both the Sender and the Receiver.

3. PayPal

Users in Nigera may send funds internationally using PayPal but cannot receive funds.

Compare the limited functionality of PayPal for Nigeria with PayPal for New Zealand, where users can Send and Receive funds internationally.

Even if PayPal did offer full functionality to Nigerian users, they could only withdraw funds to their bank accounts and get the poor official USD/NGN rate.

4. Bitcoin

Send BTC to a family member in Nigeria and they sell them (legally) for NGN at :


Today, February 2nd, 2017 1 BTC = $980 USD.

USD $1 = 470,000 / 980 = NGN 479

USD 100 = NGN 47,900

There are no fees to pay other than a tiny Bitcoin Transaction Fee, perhaps $0.50.

5. Cash Dollars (Black Market)

Black market rates for cash US dollars.

$1 = NGN 495

$100 = NGN 49,500

Most people in the West have never used a black market to sell hard currency. The procedure is the same in every country and across time. It is like buying marijuana. (I first bought Durban Poison in the Malay Quarter of Cape Town in 1982. I first used a currency black market as a University student traveling in Warsaw Pact Poland in 1984.)

It is invariably an illegal activity punishable under criminal law (and by death in North Korea). You take your stash of dollars to a street vendor and he gives you the local currency — NGN — in exchange. It is an uncomfortable transaction. You are at risk to both dishonesty by the currency vendor who might supply counterfeit currency and imprisonment by the police.

So What’s the Best Option?

To summarize, Cash Dollars convert to the greatest amount of local Nigerian currency but there remains a problem: How does the expatriate Nigerian deliver physical cash dollars to his family in Nigeria?

Using Bitcoin is a close number 2 in terms of the total return, but does not encounter the problem of physically transporting currency to the destination. And selling Bitcoins for NGN on is not a crime, whereas selling USD for NGN in the black market is a crime.

*PayPal does not work in Nigeria

This is a great video about Jacob Hansen, a Dane, selling Bitcoin for Argentinians Pesos in Argentina in 2013 and benefiting from the black market rate for hard currency (before, face to face meetings were necessary).

Are Nigerians Using Bitcoin?

Sure, it makes sense for Nigerians to use Bitcoin to maximize the value of their remittances. But are they, in fact, using Bitcoin?

We have three ways to independently verify interest in and use of Bitcoin in a specific economy:

  • trading volumes;
  • Alexa rankings of in Nigeria;
  • and Google Trends.

LocalBitcoins Trading Volumes

Local Volume Bitcoin Charts on Coin.Dance is a useful resource but data are is unavailable for Nigeria.

Alexa Rankings of

Nigerians are the most significant users of globally.

Note that Nigeria and Venezuela (population 30 million) are included in the Top 5 of Visitors. Both economies have black markets for USD. India takes #3 position; its prominent position might be related to the current purge of high-denomination banknotes in the Indian economy.

Google Trends

The great interest in Bitcoin in Nigeria is confirmed by Google Trends:

So it’s clear that Bitcoin can add great value to the lives of Nigerians amid their currency crisis. Moreover, many Nigerians are indeed using Bitcoins [or are at the very least becoming interested in using it]. Up-to-date data and FX rates for global currency black markets is available at my website

Do you agree that Bitcoin is the best option to send money to Nigeria? Share your thoughts below!

Images courtesy of Alexa, LocalBitcoins,, CATO institute, reddit, Twitter, Western Union

Joe WeisenthalNigeriaremittancesVenezuelaWestern Union

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