Written by Nkechi Ogbonna, a business reporter for BBC West Africa. The Nigerian government has demanded almost $10 billion in compensation from cryptocurrency firm, Binance, for manipulating foreign exchange rates and causing the naira to lose nearly 70% of its value in recent months. Binance has not responded to requests for comment.
Two Binance executives were arrested in Nigeria earlier this week. Nigeria, known for being Africa’s biggest economy, is also one of the world’s largest cryptocurrency markets. The central bank governor, Olayemi Cardoso, stated that Binance Nigeria had moved $26 billion worth of untraceable funds. Tilewa Adebajo, from CFG Advisory, says these allegations are significant as they amount to more than the annual Nigeria diaspora remittances.
Cryptocurrency transactions equivalent to about 12% of Nigeria’s GDP took place in the year to June 2023, according to Reuters news agency. While cryptocurrencies are not illegal in Nigeria, firms must register to operate there. However, Binance failed to do so, according to a special adviser to Nigeria’s president.
President Bola Tinubu scrapped the policy of pegging the naira to the dollar last year, allowing traders to determine the exchange rate. However, special adviser Bayo Onanuga states that the recent collapse was not due to normal activity but was caused by individuals on Binance’s platform. The government could not allow this to continue, leading to the demand for compensation.
Binance is one of the most popular cryptocurrency platforms in Nigeria, and its suspension, along with other firms, has caused frustration among Nigerian users. The government believes that cryptocurrency is used for money laundering and funding terror, and the Nigerian Financial Intelligence Unit reports that the anonymity and privacy inherent in the system attract individuals with illicit intentions.
In addition to the collapse of the naira, the Nigerian government has closed thousands of bureaux de change in an attempt to stabilize the currency. The central bank has been under pressure to do so as the high cost of living, including food, fuel, and transport, has led to protests in recent weeks.
Additional reporting by Natasha Booty.
