(Bloomberg) -- Nigerians accumulating cryptocurrencies to shield assets against a weakening naira have contributed to a slump in the fiat currency to a record low in the unauthorized market. 

The naira weakened to 670 per dollar on Wednesday said Abubakar Mohammed, an operator of a bureau de change that tracks the data in Lagos, the nation’s commercial hub. This compares with 424.34 naira at the official spot market as of 9.22 a.m. local time, 58% cheaper than the rate in the black market, where the greenback is freely traded. 

Africa’s largest economy operates a multiple exchange rate system dominated by an official rate, which is tightly managed by the Central Bank of Nigeria. There’s also an unauthorized black market, where the rates are largely determined by supply and demand, making it a fairer reflection naira’s value. A third, the crypto exchange rate, has emerged as Nigerians increasingly accumulate the digital asset due to scarcity of the local currency from official sources compounded by three devaluations since 2020. 

More people are buying cryptocurrencies because they are losing confidence in the naira, Aminu Gwadabe, president of the Association of Bureau de Change Operators of Nigeria, said by phone. “The USD rate on the crypto floor is used in determining the value of the local currency,” Gwadabe said. 

While financial institutions are banned by the central bank from facilitating cryptocurrency trades in Africa’s largest economy, many Nigerians still exchange the digital currency in in the peer-to-peer market where transactions are priced in dollars. 

The greenback was quoted at 687.6 naira on Wednesday for peer-to-peer transactions, according to live data on the website of Binance Holdings Ltd., the world’s biggest crypto exchange, an indication the naira could weaken further in the unauthorized market. 

People are buying dollars to purchase digital assets, Gwadabe said. “The USD buy rate on the crypto floor is moving at the same time with local rate,” he said. 

The Binance platform shows Nigerians had conducted $103,691 of trades in digital currencies in the 24 hours to 10.36 a.m. local time in Lagos on Wednesday. Nigerians traded $185 million of Bitcoin on the platform in the first three months of the year, accounting for a quarter of transactions in the period on Paxful, a crypto trading platform.  

Read: Naira Falls to Record Tracking Central Bank’s Latest Dollar Sale

A spokesman for the central bank didn’t respond to WhatsApp and text messages for comment while telephone call didn’t connect.

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