The Effect of Crypto Currency on Exchange Rate in Nigeria

Abstract

In recent years, many changes in commercial activities have increased significantly. Electronic commerce continues to grow, but payment methods for services are growing, such as virtual currency. The acceptability and use of cryptocurrencies such as Bitcoin and other cryptocurrencies globally attracted the attention of economists and other financial experts in recent times. Nigeria is one of the most crypto-adopting countries globally. Still, the central bank recently issued a statement that appeared to be a ban on the usage of Bitcoin and other digital assets in the country. However, the scenario has changed as cryptocurrency grows and thrives in the country. Based on this, this study aims to examine the impact of Bitcoin on the exchange rate in Nigeria. The main independent variable is Bitcoin price volatility, specified as BTCE and controlled by the consumer price index and interest rate. The study used monthly time series data from January 2015 to December 2020 and analyzed using the Autoregressive Distributed lag model (ARDL). The result shows that Bitcoin price significantly affects the exchange rate in both the short and long run. A Higher Bitcoin price implies an appreciation of the domestic currency. Therefore, we recommend that the Nigerian government pay attention to the movement of cryptocurrency prices.