Nigeria’s Efforts to Stop Naira Decline: Focus on Cryptocurrency
Binance Halts Naira Operations Amid Cryptocurrency Regulation in Nigeria
The world’s largest cryptocurrency exchange, Binance, is suspending its operations in Nigeria’s naira currency due to increased scrutiny from the government on crypto businesses.
This decision comes as Nigerian authorities have imposed restrictions on cryptocurrency exchanges to address the devaluation of the local currency. Officials have accused crypto exchanges of distorting foreign exchange rates, contributing to the weakening of the naira.
In an email sent to its Nigerian users, Binance announced the closure of all its naira-based services on March 8. However, users can still utilize services and products for other available cryptocurrencies.
Local media reported that two Binance officials who came to Nigeria for negotiations with the government were detained and had their passports seized. While Nigerian officials have not confirmed these arrests, lawmakers are considering issuing arrest warrants for the company’s top executives for “ignoring invitations.”
According to Seyi Awojulugbe, a senior analyst at Lagos-based risk consultancy firm SBM Intelligence, these detentions could negatively impact Nigeria’s reputation.
Binance has denied any wrongdoing, as stated in a previous statement on its website.
Bayo Onanuga, a media adviser to the Nigerian president, accused Binance of sabotaging the country’s economy by influencing exchange rates. He emphasized that the government’s action against Binance was necessary to prevent economic sabotage.
Before the general election in February 2023, President Bola Tinubu promised a regulatory environment to promote the healthy adoption of digital assets, including cryptocurrency. However, the Central Bank of Nigeria had previously prohibited banks from facilitating crypto transactions and ordered the closure of accounts linked to cryptocurrency exchanges in 2021.
Despite the ban, Nigerians’ interest in cryptocurrency continued to grow, with many turning to peer-to-peer transactions. This led Nigeria to rise from the 11th position in 2022 to the second place on a global crypto adoption index a year later, according to Chainalysis.
The CBN reversed its decision after Tinubu assumed office, but a more intense crackdown on crypto exchanges began shortly after. Experts argue that a balanced regulatory approach is needed to safeguard stakeholders’ interests, maintain financial stability, and promote innovation.
Arushi Goel, the head of policy for the Middle East and Africa at Chainalysis, highlighted the necessity for clear regulatory reforms given Nigeria’s high cryptocurrency adoption rate.
The International Monetary Fund (IMF) projected a modest 3.2 percent GDP growth for Nigeria’s economy in 2024. However, it warned that a weakened naira, inflation, and policy tightening could pose challenges.
Ray Youssef, CEO of NoOnes, a peer-to-peer cryptocurrency marketplace, expressed concerns that the crypto crackdown could further strain Nigeria’s economy and impact millions of people who rely on peer-to-peer mechanisms for trading digital assets.
