Abuja, Nigeria – Economic analysts and crypto enthusiasts are raising concerns following Nigeria’s ban on end-to-end transactions – a type of payment processing – involving its currency, the naira, on the world’s largest cryptocurrency exchange platform, Binance.
Binance disabled all its naira services on Friday after Nigerian authorities accused the company of exploitation, devaluation of the naira and money laundering.
The restriction on naira services on Binance exchange held firm as of Monday. But critics said the measure might increase youth unemployment in a country already struggling with soaring inflation.
The latest measure by authorities followed recent moves to try to save Nigeria’s currency from collapse and address economic problems.
Authorities said Binance manipulated exchange rates through speculation and rate-fixing, leading to the devaluation of the naira.
The government also accused the company of terrorism financing and money laundering, saying $26 billion worth of transactions on the platform were untraceable.
Binance denied any wrongdoing in a statement posted on its website last month.
Central Bank blamed
Public finance expert Isaac Botti said transactions on Binance were not the source of Nigeria’s economic problems.
‘It is something that was caused as a result of our reckless demand and utilization of hard currency in Nigeria,’ Botti said. ‘The major challenge is not in the amount of fictitious assets or dollars that people kept in their crypto accounts. It is in the volume of dollars that was released physically by the Central Bank of Nigeria.’
Nigeria has 13 million cryptocurrency holders, more than any other African country. Kenya is next with 4.4 million.
In a statement last week, Binance said any remaining naira on the platform would be automatically converted to Tether – a cryptocurrency stablecoin pegged to the U.S. dollar.
Last year, Nigeria introduced currency controls and ended petrol subsidies with the aim of reviving the economy.
But afterward, the naira plummeted to record lows. Analysts said the government ban on Binance could lead to job losses.
Blockchain expert Jahdiel Chidi agreed but said Nigerians would turn to new crypto exchanges to possibly fill the gap created by Binance’s exit.
‘The implication is that people are going to go to other exchanges,’ Chidi said, ‘I mean, there are other options and platforms that you can do the same thing that was obtainable on Binance.’
In February, Nigerian authorities cracked down on local currency exchange operators and revoked more than 4,000 licenses after the exchange rate dropped to 1,900 naira to one dollar.
Chidi said the Nigerian government must look for better measures in addressing the country’s current foreign exchange challenges.
‘I think it was a decision made from the point of hurry without critical investigation into the accusation of Binance’s involvement in certain naira-dollar exchange rates,’ Chidi said. ‘The main issue that I think they should look at is to focus on the import duty. That’s one of the things that has devalued the naira. Binance just happens to be a victim of wrong decisions by the government.’
Last year, the Central Bank reversed its stance on crypto companies, allowing them to operate – a move that was then viewed as a positive posture toward digital currency assets.
