The Nigerian government has formally requested nearly $10 billion in compensation from cryptocurrency firm Binance, accusing it of manipulating foreign exchange rates, leading to a significant devaluation of the national currency, the naira. This move comes after the arrest of two Binance executives in Nigeria earlier in the week.
Nigeria, being Africa’s largest economy and a significant player in the global cryptocurrency market, alleges that Binance engaged in currency speculation and rate-fixing, causing the naira to lose nearly 70% of its value in recent months. The government asserts that Binance Nigeria moved $26 billion worth of untraceable funds.
Tilewa Adebajo, from CFG Advisory, commented on the severity of the allegations, stating, “These allegations are weighty. That’s a huge sum – even more than the annual Nigeria diaspora remittances of $24 billion. The government must have done their homework, hence the allegations.”
Cryptocurrency transactions in Nigeria accounted for approximately 12% of the country’s GDP in the year leading to June 2023. While cryptocurrencies are not illegal in Nigeria, companies must register to operate, a requirement that Binance allegedly failed to fulfill, according to a special adviser to Nigeria’s president.
The recent devaluation of the naira, from 460 to 1,595 against the US dollar in a year, prompted the government to take action against cryptocurrency platforms, including the suspension of Binance, Coinbase, Kraken, Forextime, OctaFX, Crypto, and FXTM.
President Bola Tinubu’s decision to unpeg the naira from the dollar faced criticism as the naira’s value experienced an abrupt decline. Special adviser Bayo Onanuga emphasized that the collapse was not a result of normal market activity but was attributed to activities on the Binance platform. He stated, “The government could not just fold its hands and allow this thing to continue.”
Binance, considered one of the most popular cryptocurrency platforms in Nigeria, has yet to respond to the allegations. The government also claims that cryptocurrencies are used for money laundering and funding terrorism, citing the anonymity and privacy features inherent in the crypto system.
Nigeria has taken multiple measures to address the crisis, including the closure of thousands of bureaux de change and the suspension of various cryptocurrency firms. The central bank has been under pressure to stabilize the naira, with the currency’s collapse exacerbating the cost-of-living crisis, leading to protests against high food and commodity prices.
