I live in California, where everything is more expensive. Insurance, taxes, food, entertainment, gasoline, real estate…everything costs more than most of the country. In exchange, I haven't needed to own or wear a jacket for decades, and I can take walks outside 90% of the year. In addition, there are a variety of ethnicities, things to do, and places to visit. So (to me), even though I pay a premium to live in California, it's worth it.

I have a choice on whether I want to pay this premium in exchange for sunny weather, a large economy, and diversity. If I wanted, I could move to most other states and sacrifice some of the amenities I appreciate about California. It's nice knowing that I have a choice.

But what happens when we lose our choice? What if the government said that you have to stay in the same state for the remainder of your life and you have until a specific date to choose which state you want to spend the rest of your life in? You would see premiums rise significantly for real estate in certain states and slide quickly in other states.

Imagining the government enforcing a scenario like this is outlandish. The government has control, but it doesn't have absolute control. This applies to most things. Unfortunately, money isn't one of them. Regarding our fiat currencies, the government has 100% control of the monetary system.

Luckily, I live in the USA. Our money is the world's reserve currency, and we get to create money in which the world sees immediate value. However, it's not something I feel comfortable taking for granted. The world hasn't always viewed the dollar as the world's reserve currency, and arguments can be made that the dollar will only remain the world's reserve currency for a while.

Nigerians are losing their choice.

Nigeria is the largest economy in Africa. It's the seventh most populated nation, with over 200 million people. And although statistics vary, Nigerians are amongst the leaders in Bitcoin adoption. But unfortunately, the national currency in Nigeria called, the Naira, hasn't performed too well against the US dollar in the 21st century.

Depending on who you ask, the Naira suffers for various reasons, including too much debt, low national oil revenues, and poor policies by the Central Bank of Nigeria (CBN). Regardless, the Naira has only had bouts of stability during this century.

Effective this year, the CBN will be enacting a cashless policy. Aishah Ahmad, the deputy governor of the CBN, explained,

“Processing fees for transactions above the prescribed limit was fixed at 3 percent and 2 percent for withdrawals and lodgments by individuals and 5 percent and 3 percent for withdrawals and lodgments by corporates, respectively.”

The development, she explained, is in response to the “significant evolution of the Nigerian payment system and widespread availability of a plethora of financial touchpoints and electronic payment options to all Nigerian citizens.”

Ahmad listed the benefits of the cashless policy to include reduction of cost of cash management (processing, movement, security, destruction of old notes) which is often passed on indirectly to Nigerians, including eliminating the physical risk of cash — robbery, kidnapping, terrorism.

Nigerians will soon face limits on their daily cash withdrawals of $44 worth of Naira. Additionally, new banknotes will replace existing cash, so citizens must exchange their currency by the end of January.

How Nigerians are responding

The Nigerian government banned crypto sales in the country in 2021. After the ban, Nigerians could no longer use centralized exchanges like Binance, Kraken, or Coinbase for purchasing crypto assets. Instead, the people responded by setting up P2P exchanges, which serve as a marketplace where people can exchange Bitcoin for Naira from one person directly to another.

Unfortunately, for Nigerians, this lack of Bitcoin liquidity paired with a failing national currency has caused Bitcoin prices to spike on the P2P exchanges. Today, a Nigerian must spend $38,000 worth of Naira to purchase one Bitcoin that sells on centralized exchanges for approximately $23,000.

This premium is purely generated by supply and demand. It illustrates what a supply squeeze does to the price of Bitcoin. It also shows what happens when a country's citizens lose faith in their national bank and governmental monetary policies.

What can we learn from these premiums?

It's easy for us to live in our part of the world and think that something like this couldn't happen to us. However, with all the discussion of central bank digital currencies, I wonder how anyone can truly dismiss the possibility of living in a cashless society.

This doesn't mean faith and credibility will immediately be lost in government-issued currencies. After all, from the graph shown earlier, the Naira has a poor history, and increases in government control would likely make more Nigerians seek Bitcoin's safe harbor.

However, if a cashless system is presented in larger economies, what impact would this have on Bitcoin's price? Yes, in most of the world, we can use centralized exchanges with deeper liquidity than P2P exchanges, but the centralized exchanges only have a couple of million Bitcoin on them.

GDP in Nigeria is expected to be $454 billion by the end of 2023. Meanwhile, the US GDP is over $25 trillion. In other words, much money could be chasing a small amount of Bitcoin.

Key Takeaways

Nigeria is a perfect example of the proof being in the pudding. People don't want to have limitations on how much cash they can access, and paying a transaction fee on cash isn't popular in Nigeria. So the most convenient alternative that allows Nigerians to have control over their wealth is Bitcoin.

This further reflects how Bitcoin has different utility, meanings, and importance in different parts of the world. One thing that all modern economies have in common is vast amounts of debt and debt servicing obligations. Additionally, central banks are increasingly looking for ways to control money and keep the government monopoly on money issuance and valuation.

What would you do if you found out you could only pull a certain amount of cash from your bank account daily? Would surcharges and "processing fees" on cash transactions consolidate your faith in fiat currencies? Or, could Bitcoin gain popularity in other parts of the world as we move towards a cashless society? Share your thoughts in the response section.

This article isn't financial advice, and I am not a financial advisor. It is strictly my opinion. Crypto assets involve tremendous risks. I am someone who wants to maintain and grow my wealth so that I can provide a good livelihood for my family and myself. So do your research before making any investments.