Nigeria finds itself at a critical juncture as the nation grapples with an unprecedented foreign exchange crisis, prompting government officials to deliberate on urgent measures aimed at stemming the tide of relentless market manipulation and illicit financial activities.
Sources within the government, who spoke on condition of anonymity, disclosed to Premium Times that among the proposed actions under consideration is the potential blocking of online platforms operated by Binance and other prominent cryptocurrency firms.
The Nigerian currency, the naira, has been on a freefall, sinking to an all-time low of N1,900 to a dollar in the parallel market. This alarming depreciation has sent shockwaves through the economy, triggering grave concerns among policymakers and regulators who are now racing to find solutions to stabilize the volatile forex market.
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According to officials privy to the matter, the decision to scrutinize platforms like Binance arises from suspicions that unscrupulous actors, including currency speculators and money launderers, are exploiting these digital avenues to carry out nefarious activities.
There are grave allegations of economic sabotage, with authorities attributing the activities on these platforms to the sustained devaluation of the naira.
Binance commands huge userbase in Nigeria, made up of teeming urban youths who trade cryptocurrencies. This is despite stern warnings issued by regulatory bodies such as the Securities and Exchange Commission (SEC), last September that the crypto exchange is neither registered nor regulated in Nigeria.
The concerns extend beyond mere economic implications, as law enforcement sources highlight the grave national security risks associated with the unchecked use of these platforms by criminal elements, including ransom payments and other illicit dealings.
An official involved in probing criminal complaints linked to digital asset platforms likened the situation to a “sophisticated heist against the Nigerian economy.” Alleged manipulators exploit vulnerabilities within the system, orchestrating fraudulent transactions to artificially inflate or deflate forex values, thereby wreaking havoc on the stability of the market.
“This therefore gives the dollar a fake value against the naira which then sets a frenzy and mislead the market. This fake price is then often quoted by BDCs who raise their prices to meet the Binance benchmark even without any corresponding demand in that segment,” she told Premium Times.
Expressing grave concern over the perilous trajectory of the naira, a senior executive at the Central Bank of Nigeria (CBN), who spoke to Premium Times, attributed the currency’s downward spiral to orchestrated devaluation driven by speculative trading on platforms such as Binance.
“Through manipulative rent seeking, Binance’s global reach results in higher USD to NGN exchange rates often being used as a benchmark for currency trading, misleadingly devaluing the Naira in global markets.”
But he added that trading on the platform is encouraged by activities of money launderers and terrorist financiers “who have no qualms with the arbitrage”.
“We started noticing this sharp trend from February 9, and since then it has caused significant devaluation of the naira against the USD. This is simply criminal,” he said.
He noted the pivotal role played by these platforms in establishing misleading benchmarks for currency trading, exacerbating the depreciation of the naira on the global stage.
The situation echoes similar accusations and regulatory crackdowns against Binance in various jurisdictions, including ongoing legal battles in the United States. Countries such as Malaysia, France, and Malta have also taken decisive steps to regulate or curtail the operations of cryptocurrency firms amid mounting concerns over market integrity and financial stability.
In response to the escalating crisis, the Office of the National Security Adviser (ONSA) announced a collaborative initiative with the CBN to clamp down on currency speculators and economic saboteurs. Zakari Mijinyawa, the Head of Strategic Communication at ONSA, issued a stern warning, cautioning that individuals and entities involved in illicit activities within Nigeria’s forex market would face severe consequences.
Last week, there were reports of conflict involving some personnel of the Economic and Financial Crimes Commission (EFCC) and operators of BDCs in Abuja. The former had allegedly invaded the latter’s business premises in the quest of curtailing FX speculation and the resulting economic sabotage.
Binance, in a bid to address the mounting regulatory pressure, acknowledged its collaboration with the Nigerian government to tackle compliance issues and combat market manipulation. The platform unveiled a series of measures aimed at bolstering oversight and curbing abusive practices by users.
Binance disclosed this in an announcement on its “commitment to P2P users in Nigeria” on Tuesday, warning that “users behaving in a manipulative way will be removed from the platform.”
“As industry leaders,” Binance said, “We are working hand in hand with local authorities, lawmakers, and regulators to ensure we act on non-compliance.’’
The crypto exchange platform further said it is “setting an upper limit for ads, filtering and removing bad ads, requiring and raising deposits for merchants posting ads as well as processes for actioning against any market manipulators.”
On Tuesday, Binance took action to restrict its Nigerian users by disabling the sell option, preventing them from selling fiat currency and USDT on the platform. Additionally, it imposed a cap of $1802 on the buy option for Nigerian users. Furthermore, Binance disabled the purchase of cryptocurrencies via peer-to-peer (P2P) transactions for its Nigerian users, thereby leaving individuals who wish to sell their crypto assets, such as Bitcoin, BNB, and Ethereum, via P2P transactions stranded.
However, the government’s potential move to collaborate with Binance in restricting dollar-naira trading has ignited a firestorm of controversy, evoking comparisons to previous regulatory interventions in the cryptocurrency space. Former President Muhammadu Buhari’s administration had previously imposed a ban on cryptocurrency trading in 2021, only to reverse course under mounting pressure in December 2023.
Under Buhari’s administration, the Central Bank of Nigeria also shut down AbokiFX, an online exchange rates aggregator it accused of manipulating FX rates. However, the move, which took place when the naira was around N570 against the dollar, did not in any way stop the free fall of the currency.