Nigeria plans to ban cryptocurrency exchanges: accused of manipulating local fiat currency exchange rates, causing the Naira to plummet 28% in a day

DL News reported that the Nigerian fiat currency, the Naira (NGN), experienced drastic fluctuations on Wednesday. Authorities accused individuals of manipulating the USD to Naira exchange rate through cryptocurrency exchanges and called for a ban on cryptocurrencies. However, on the same day, the websites of the country's exchanges were indeed inaccessible.

Exchange Accused of Manipulating Naira Exchange Rate

On the 21st, the USD/NGN exchange rate experienced a sharp fluctuation within a short period of time. It first dropped to a historic low of 1,900, then suddenly surged to 1,358 within a few hours, and finally returned to 1,675 Naira, marking a maximum daily decline of 28.5%.

Such significant fluctuations have drawn the attention of the local government, which has pointed fingers at cryptocurrency exchanges themselves, accusing them of providing a platform for users to manipulate exchange rates.

In particular, exchanges like Binance have been accused of facilitating wash trading, where individuals create fake buy and sell orders on the USDT/NGN trading pair on Binance, causing the value of USD against Naira to collapse on the platform.

This behavior is said to have impacted Nigeria's parallel forex market, including peer-to-peer merchants on Binance and forex exchange dealers who rely on the platform's quotes for transactions.

Binance responded by stating:

Foreign exchange rates are influenced by various complex factors, and Binance does not have an impact on this.

Presidential Advisor Calls for Ban on Cryptocurrency

The country's presidential advisor, Bayo Onanuga, expressed strong condemnation and called on the country's Economic and Financial Crimes Commission (EFCC) and the Central Bank (CBN) to swiftly ban the operations of cryptocurrency exchanges in the country.

The Naira-Dollar manipulators

I chanced on an X post Tuesday night by one Brother Bernard @Mikael C Bernard who railed against what he called the order of the EFCC, NSA on Finance to set a cap on traders selling USD tokens for Naira equivalent.

He disclosed that token sellers… pic.twitter.com/c9YBjawJMz

— Bayo Onanuga (@aonanuga1956) February 21, 2024

The EFCC and CBN should take action against platforms attempting to manipulate the national currency and ban cryptocurrencies, or else our currency will continue to depreciate.

Users Reportedly Unable to Access Exchange Websites

According to a report by Bloomberg, Nigerian authorities are indeed moving to clamp down on cryptocurrency exchanges. Users of platforms like Binance, Coinbase, and Kraken have reported recent difficulties accessing these websites:

A presidential spokesperson confirmed that an order was issued by the authorities to telecommunication and internet service providers to block access to cryptocurrency exchange platforms.

Binance responded initially by saying:

We have identified that some users are experiencing issues accessing binance.com, which currently affects only the website, while the app remains accessible.

It is reported that the affected platforms have since been restored, with local users able to resume services, although the status of the ban remains uncertain.

Divergent Views within Nigerian Authorities and People

Hard Stance on Cryptocurrency Regulation by Authorities

In 2021, the Central Bank of Nigeria had previously banned banks from providing services to cryptocurrency exchanges, a directive that was later rescinded.

Last year, the Securities and Exchange Commission (SEC) of the country also demanded that Binance Nigeria Limited, a subsidiary of Binance, cease operations in the country for not being registered with the local authorities.

Nigerian SEC: Binance operating illegally in the country, immediately cease promotion to users

People Embracing Cryptocurrency

However, the Bitcoin to Naira exchange rate hit a historic high in October last year, with a 269% annual increase, seemingly due to the significant devaluation of the Naira at the time.

Since the announcement of a floating exchange rate system by the authorities, the USD to Naira rate has dropped by 90%.

A report by research firm Chainalysis also indicated that despite the relatively smaller market size in the Central and Southern Africa region, cryptocurrency has penetrated the market and become an integral part of daily life for local residents:

Nigeria serves as a strong example, ranking second in global cryptocurrency adoption index with a trading volume growth rate of 9% annually, standing out in the region.