Naira sinks the dollar, gains as much as N701/$1 on Binance
The Naira rose to its highest level since December 2022 against the dollar on Wednesday as demand for the dollar-backed stablecoin (USDT) declined on Binance’s P2P market.
The naira was trading at N701 per dollar during intraday trading but moderated to N729/$ at the time of writing. This follows allegations from several Paxful users that prices on peer-to-peer markets are even higher on a substantial number of popular P2P marketplaces.
The official exchange rate, which rules the others, is strictly controlled by the CBN. The Nafex, a marketplace for exporters and importers, is also responsible for setting the exchange rate between the naira and the dollar in Nigeria.
The Nigerian Foreign Exchange Exchange (Nafex) was established in 2017 following Nigeria’s 2016 economic crisis. In the spot market, the naira to the dollar exchange rate is N465 to $1.
Dollar-based stablecoins have become a desirable alternative for customers and businesses in regions with unstable local currencies.
Nigeria also has the highest interest in Tether based on Google trends data with a perfect score, further emphasizing the high level of interest and recognition of the digital currency in the country.
The Central Bank of Nigeria of late has a more favorable stance regarding stablecoins, which is consistent with this interest. The construction of a legal framework for the potential adoption of a stablecoin in Nigeria was studied in an 83-page CBN research report that was recently published by the central bank under the title “Nigeria Payments System Vision 2025.”
The Apex bank’s report highlighted that stablecoin-based payment systems would probably succeed in the country; hence a framework must be created. In 2021, the CBN took a tough stance toward the digital industry, virtually forbidding Nigerian banks from providing banking services to cryptocurrency exchanges.
According to Mr. Paolo Ardoino, the Chief Technology Officer (CTO) at Tether, the token has significantly aided in the development of a more interconnected ecosystem because it combines the advantages of both traditional and digital currencies, such as price stability and instantaneous global transactions.
The Tether CTO added that stablecoins have made it easier for migrant workers to overcome the costly and restrictive barriers surrounding the remittance infrastructure.
“Stablecoins have discovered major use cases for remittances sent across international borders by migrant workers. To send money back to their families and loved ones, many workers currently must use companies like Western Union. Families lose a significant portion of their finances due to the lengthy and expensive nature of this process.
Consequently, Prior to the release of the US inflation data report scheduled later in the day, the greenback moderated during the Asian session. Except for USD/JPY, most currency pairs seem to be in a holding pattern. It reached a new high for the previous month.
The naira lost some of its gains on the P2P market when traders weighed on reports that the US Treasury Secretary Janet Yellen stated that the world’s largest economy was doing extraordinarily well, but a few Fed speakers seem to disagree with one another over likely future rate increases from the bank.
In remarks made overnight, Minneapolis Fed President Neel Kashkari upheld his reputation as a hawk and New York Fed President John Williams saw the potential for another raise to control inflation.
Austan Goolsbee, president of the Chicago Fed, on the other hand, suggested a more dovish attitude, citing the current financial crisis and the most recent IMF report as justifications for caution in monetary policy. Patrick Harker, the president of the Philadelphia Federal Reserve Bank, who may be viewed as less hawkish, joined him.
Yet, later today’s US CPI data will be extensively scrutinized for clearer indications of the Fed’s rate path. For the upcoming Federal Open Market Committee (FOMC) meeting in early May, the interest rate markets are pricing a better-than-even likelihood of an increase to the target cash rate.
Full Story: https://nairametrics.com/2023/04/12/naira-sinks-the-dollar-gains-as-much-as-n701-1-on-binance/
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