The Nigerian government has formally requested compensation of nearly $10 billion (£8 billion) from the cryptocurrency company Binance, alleging that it engaged in manipulative practices affecting foreign exchange rates through currency speculation and rate-fixing.
These actions are claimed to have resulted in a significant depreciation of the Nigerian naira, losing almost 70% of its value in recent months.
Earlier in the week, two Binance executives were arrested in Nigeria, and the company has not yet responded to inquiries from the BBC.
Nigeria, as the largest economy in Africa and a major player in the global cryptocurrency market, has been grappling with the implications of these allegations.
The central bank governor, Olayemi Cardoso, asserted that Binance Nigeria moved $26 billion in untraceable funds. Cryptocurrency transactions, constituting approximately 12% of Nigeria’s GDP, occurred in the year leading up to June 2023, according to Reuters.
“These allegations are weighty,” Tilewa Adebajo CFG Advisory tells the BBC. “That’s a huge sum – even more than the annual Nigeria diaspora remittances of $24bn”.
“The government must have done their homework, hence the allegations.”
While cryptocurrencies are not illegal in Nigeria, the government insists that firms must register to operate within the country.
Binance allegedly failed to comply with this requirement, as claimed by a special adviser to Nigeria’s president.
The recent surge in exchange rates, leading to the abrupt collapse of the naira, is attributed to activities on the Binance platform, prompting the government’s intervention.
Binance, a popular cryptocurrency platform in Nigeria, has faced suspension in the country, along with other firms like Coinbase, Kraken, Forextime, OctaFX, Crypto, and FXTM, in an attempt to stabilize the naira.
The government also accuses cryptocurrencies of being utilized for money laundering and terror financing, citing the anonymity and privacy features of the cryptocurrency system.
In response to the economic challenges posed by the depreciation of the naira, Nigeria has taken measures such as closing numerous bureaux de change and putting pressure on its central bank to stabilize the national currency. The current exchange rate is 1,595 naira to US$1, a significant decline from about 460 a year ago. This currency collapse has contributed to a cost-of-living crisis, including high food and commodity prices, fueling protests in recent weeks.
