Nigerian Government Criticizes Cryptocurrency Amidst Naira’s Decline

The Nigerian national currency continues to devalue in comparison to major global currencies, a situation for which the government is holding cryptocurrencies responsible.

On February 21, Binance, a popular cryptocurrency exchange, introduced a new regulation limiting the P2P exchange rate of USDT, sparking disapproval from the Nigerian crypto community. As a result, Binance had to retract the rate cap following the public uproar, resuming standard trading activities.

However, the attempt to mollify concerns had the unintended consequence of further complicating matters for Binance.

The Nigerian government proceeded to restrict access to various cryptocurrency trading platforms, including Binance, citing their connection to the nation’s inflationary issues.

On February 22, several users from Nigeria reported trouble accessing Binance’s app.

These issues surfaced as Nigerian officials directed telecom providers to block all cryptocurrency exchanges, a move intended to support the weakening native currency.

Binance reassured its users through emails that, despite the hiccups, their app was operational and secure. The platform reiterated its pledge to collaborate with Nigerian regulators.

Amid these troubles, there have been renewed calls for an outright ban of Binance in Nigeria, and the House of Representatives Committee on Financial Crimes has summoned Binance CEO Richard Teng over accusations of terrorism financing and money laundering.

Presidential aide Bayo Onanuga criticized Binance for effectively dictating exchange rates in Nigeria, an act perceived as encroaching on the Central Bank’s authority.

Onanuga called on the EFCC to scrutinize Binance and other exchanges such as KuCoin and Bybit, accusing them of manipulating the Nigerian Naira.

Local Nigerian crypto services also indicated that they were impacted by the government’s suppressive measures. The Nigerian crypto community vehemently opposed the government’s proposition to outright ban crypto exchanges as an overly controlling response.

Nevertheless, the Nigerian government persists in blocking Binance P2P trades, indicating an extensive crackdown on cryptocurrency activities in the nation.

The approach has sparked worry among key players, who fear it could deter innovation, discourage investment, and thwart efforts for financial inclusion in Nigeria. The concern is that such strict regulation might push cryptocurrency trading underground, depriving Nigerians of digital asset opportunities and hindering technological progress in finance.

It should be noted that the Nigerian government lifted a previous cryptocurrency ban in December 2023 that had been in place since February 2021.

Is Crypto a Threat to the Naira?

Opposition from the Nigerian government towards cryptocurrency is not a novel occurrence.

In February 2021, the Central Bank of Nigeria issued a ban on banks and financial institutions from dealing with cryptocurrency-related transactions. They justified the ban with concerns over potential involvement in money laundering, terrorism funding, and other illegal activities.

Despite the ban, Nigeria remained an active center for cryptocurrency, with its digital-savvy youth gravitating towards the promise of digital currencies. The youth, disillusioned with conventional banking, have embraced crypto platforms in vast numbers.

Recently though, the government appears to be deepening its crackdown on cryptocurrency with arrests and account freezes related to crypto activities.

This governmental crackdown coincides with an economic downturn for Nigeria, characterized by inflation, currency devaluation, and general economic instability.

The Naira’s value is in decline, diminishing substantially against other currencies such as the U.S. dollar and the Euro.

Persistent Corruption

The resistance against cryptocurrency is believed to stem from the government’s fear of losing its grasp on the financial system. Cryptocurrency, unlike government-regulated traditional currency, operates on decentralized platforms, eluding the control of any one entity.

This decentralization poses a challenge to the government’s efforts to monitor transactions, threatening its financial authority and control.

Additionally, some suggest the government’s hostile approach to crypto may be a knee-jerk reaction—not tackling the country’s actual economic problems but instead diverting attention by blaming cryptocurrencies.

With rampant corruption, poor infrastructure, and an unhealthy dependence on oil revenues, critics accuse the government of using crypto as a scapegoat to distract from its shortcomings.

As a result of these conditions, Nigeria experiences an inflationary surge affecting essentials like cement and water, leading to widespread affordability issues for everyday necessities.

Recently, Nigerian streets have seen peaceful protests advocating for cryptocurrencies, which many see as a lifeline in an economy rife with corruption, inflation, and government abuse.

As the government sows uncertainty within the Nigerian fintech ecosystem, there is a resilient move among the youth to continue adopting crypto as it provides a means of wealth preservation, global market participation, and more private financial engagement.

With the ongoing crackdown, there have been calls from the Nigerian crypto community for increased advocacy and education to foster understanding of digital currencies among lawmakers and the broader populace.

The community suggests a regulatory approach that emphasizes investor safety and market integrity, such an approach could harness the positive aspects of cryptocurrencies while reducing concerns related to their usage.

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