Nigerian Government Blames Crypto Trading for Worsening Currency Crisis – DL News

The involvement of crypto exchanges such as Binance in the Nigerian economy has sparked criticism and concerns regarding currency speculation and claims of manipulation in the forex market.

Notably, the naira’s value plunged to a historic low of 1,900 to the dollar before recovering dramatically to 1,358. It later normalized slightly to trade at 1,691 naira to the dollar—a staggering 90% drop in value in under a year.

Accusations of Price Manipulation

Binance and its role in the market are under examination by authorities, with accusations of contributing to currency speculation and forex manipulation.

Government officials have even suggested a ban on cryptocurrency trading in Nigeria, citing these concerns.

Binance has publicly distanced itself from these allegations.

Binance clarified in a public statement that it doesn’t have control over the complex determinants of foreign exchange rates.

The digital representation of the Nigerian naira, also known as NGN, on Binance’s platform is at the heart of the ongoing issues, particularly the trading pair USDT-NGN.

Binance enabled customers to convert their local currency, NGN, to other cryptocurrencies since the introduction of the NGN wallets in November 2022.

Binance isn’t alone in this; it also offers similar options for various other fiat currencies like the Ghanaian cedi, Kuwaiti dinar, and Philippine peso.

An anonymous source from Nigeria’s anti-corruption agency revealed to DL News that investigations are underway to uncover alleged coordinated attempts to distort Nigeria’s forex market using the crypto trading platform.

Reportedly, bad actors are engaging in wash trading using the USDT–NGN pair to manipulate NGN’s value on Binance.

These transactions are leading to discrepancies in exchange rates, as Binance P2P (peer-to-peer) traders derive prices from the USDT-NGN spot market.

It’s worth noting that despite reports of these activities, Binance’s trading volume for the naira against Tether (USDT) remains a fraction of Nigeria’s official forex market turnover.

Dealing with Success

Traders believe Binance’s issues stem from data transparency concerns, with local currency exchanges lacking access to real-time rates until the advent of Binance’s readily available data stream.

Other traders suggest that the vast popularity of crypto trading among the youth in Nigeria, despite its relatively small market size compared to traditional markets, has placed Binance in a predicament due to its own success.

Data from Chainalysis indicated that crypto trading in Nigeria saw a 9% growth from 2021 to 2023, making the country one of the leaders in global crypto adoption.

Binance also released a statement addressing the price suppression issue, suggesting it took necessary measures to prevent it from escalating.

Possibility of Crypto Prohibition

Amid talks of a crypto trading prohibition, insider sources speculate on government directives to restrict access to cryptocurrency websites via local internet service providers.

Crypto trader Bayo cautions that the government might leverage the current predicaments as a pretext to clamp down on crypto trading.

While government representatives were unavailable for immediate comment, the local crypto community remains on alert for any developments.

Previously, the Association of Bureaux de Change Operators of Nigeria had advocated for a Binance ban, blaming the exchange for the naira’s depreciation.

Nigerian authorities have a history of skepticism towards the crypto market; after banning bank services for crypto exchanges in 2021, they backpedaled by the end of the year.

A potential ban on crypto trading would add to the list of stringent measures against alleged currency manipulators as the naira’s value dwindles.

There have been government raids on currency exchange operators, intensifying the crackdown on market manipulation.

Osato Avan-Nomayo, our Nigeria-based correspondent specializing in DeFi and technology, reports this development. For story tips or information, reach out at osato@dlnews.com.