IMPACT OF CRYPTOCURRENCY ON TRADITIONAL FIAT CURRENCY IN NIGERIA.
Abstract
ABSTRACT
This study investigates the impact of cryptocurrency on traditional fiat currency in
Nigeria, focusing on the relationship between cryptocurrency prices, trading volumes,
and the value of the Nigerian Naira (NGN). In recent years, the adoption of
cryptocurrencies has surged, raising questions about their influence on established
monetary systems. Utilizing quarterly data from Q1 2010 to Q4 2023, the research
employs the Autoregressive Distributed Lag (ARDL) model to analyze the long-term and
short-term dynamics between the variables. The study begins by assessing the
stationarity of the data using the Kwiatkowski-Phillips-Schmidt-Shin (KPSS) unit root
test, which confirms that the variables are stationary at levels and first differences.
Following this, the ARDL bounds test is conducted to evaluate potential cointegration,
revealing a significant long-run relationship among the variables. The findings indicate
that cryptocurrency trading significantly impacts the value of fiat money in Nigeria.
Specifically, while an increase in cryptocurrency prices correlates positively with the
value of the Naira, higher trading volumes are associated with a negative relationship,
attributed to liquidity challenges in the foreign exchange market. Moreover, the Granger
causality test results show no significant causal relationship between the variables,
suggesting that fluctuations in cryptocurrency prices and volumes do not predict
changes in fiat money value. This absence of causality underscores the limited
integration of cryptocurrency and traditional monetary systems in Nigeria. The study
concludes that while cryptocurrencies present alternative investment avenues, they do
not yet serve as effective substitutes for fiat currency. Consequently, recommendations
for policymakers include the need for regulatory frameworks to monitor cryptocurrency
activities and their implications on traditional financial systems, ensuring a balanced
approach to innovation and economic stability.
Full-Text Access Notice
In accordance with the NERD Policy on promoting peer-reviewed publication, public access to the full text of a project, thesis or dissertation is restricted for three years, allowing the author and supervisors sufficient time to pursue peer-reviewed publication.
During this period, researchers with legitimate academic or research purposes may request authorisation directly from the author to enable NERD to release the indexed full texts of the work using the form below.