The Nigerian government has announced its demand for nearly $10 billion in compensation from the cryptocurrency giant Binance, alleging manipulation of foreign exchange rates and
exacerbation of the naira's steep decline.
According to Nigerian authorities, Binance engaged in currency speculation and rate-fixing, leading to a significant devaluation of the naira, which has lost nearly 70% of its value in recent months. Earlier in the week, two Binance executives were arrested in Nigeria.
Binance has remained silent in response to requests for comment from the BBC.
Nigeria, recognized as Africa's largest economy and a significant player in the global cryptocurrency market, has seen substantial cryptocurrency transactions, amounting to approximately 12% of the country's GDP in the year leading up to June 2023, as reported by Reuters.
While cryptocurrencies are not illegal in Nigeria, firms are required to register to operate within the country. However, a special adviser to Nigeria's president revealed that Binance failed to comply with this regulation.
President Bola Tinubu's decision to abolish the policy of pegging the naira to the dollar was intended to allow market forces to determine currency rates. Nonetheless, the recent dramatic depreciation of the naira was attributed to activities on the Binance platform, according to special advisor Bayo Onanuga.
The suspension of Binance and several other cryptocurrency firms in Nigeria, including Coinbase, Kraken, and others, has frustrated Nigerian users and aims to halt the naira's decline.
Additionally, concerns over money laundering and terrorist financing have led the Nigerian government to crack down on cryptocurrency usage. The anonymity of cryptocurrency transactions makes them attractive to individuals with illicit intentions, according to a report by the Nigerian Financial Intelligence Unit.
To further address foreign exchange trading, Nigeria has shut down numerous bureaux de change. The central bank has faced mounting pressure to stabilize the naira, which has plummeted to 1,595 naira to the US dollar, compared to approximately 460 a year earlier.
The sharp depreciation of the naira has exacerbated the country's cost-of-living crisis, marked by soaring food and commodity prices, fueling recent protests against the government. Photo by Bretwa, Wikimedia commons.