The Nigerian government has announced that it is seeking nearly $10 billion (£8 billion) in compensation from cryptocurrency firm Binance. The government accuses Binance of manipulating foreign exchange rates, leading to significant devaluation of the Nigerian naira. This move follows the recent arrest of two Binance executives in Nigeria.
As one of Africa’s largest economies and a major market for cryptocurrencies, Nigeria has been deeply affected by the alleged actions of Binance. The Nigerian government claims that Binance engaged in currency speculation and rate-fixing, resulting in the devaluation of the naira by almost 70% in recent months.
Binance, a popular cryptocurrency platform in the country, has chosen not to respond to the BBC’s requests for comment regarding these allegations.
The magnitude of the government’s demand for compensation is striking. Tilewa Adebajo, an analyst from CFG Advisory, highlighted the substantial sum, stating that it exceeds Nigeria’s annual diaspora remittances of $24 billion.
Nigeria has become a significant player in the cryptocurrency market, with transactions equivalent to approximately 12% of its Gross Domestic Product (GDP) taking place in the year leading up to June 2023, according to Reuters.
Although cryptocurrencies are not illegal in Nigeria, firms are required to register to operate within the country. The government alleges that Binance failed to comply with this regulation.
President Bola Tinubu, who took office last year, abandoned the policy of pegging the naira to the US dollar, allowing its value to be determined by market forces. However, Bayo Onanuga, a special advisor to Nigeria’s president, claims that the recent collapse of the currency was not a result of ordinary market activity. According to Onanuga, “All of a sudden the exchange rate went through the roof… and it was being caused by the people on the Binance platform.” He emphasized the government’s decision to take action against such destabilizing activities.
To the disappointment of Nigerian users, Binance and several other cryptocurrency firms have been suspended in recent weeks, including Coinbase, Kraken, Forextime, OctaFX, Crypto, and FXTM. These measures were implemented in an attempt to halt the depreciation of the naira.
The Nigerian government also raises concerns about the misuse of cryptocurrencies for purposes such as money laundering and financing illegal activities. A recent report by the Nigerian Financial Intelligence Unit highlighted the anonymity and privacy inherent in the cryptocurrency system, which attracts individuals with illicit intentions.
Nigeria’s central bank governor, Olayemi Cardoso, revealed on Tuesday that illicit flows had been detected on some cryptocurrency platforms in the country. However, no specific firms were named as culprits.
The Central Bank of Nigeria has faced pressure to stabilize the naira, which currently exchanges at 1,595 naira to US$1, compared to about 460 a year ago. The devaluation has contributed to a cost-of-living crisis, with soaring prices for essential commodities like food, fuel, and transportation leading to widespread protests in recent weeks.
As the government seeks compensation from Binance and implements measures to address the cryptocurrency market, the implications for Nigeria’s economy and the cryptocurrency industry remain uncertain.
Image Credit: Emmanuel Ikwuegbu/ Unsplash
