Nigeria Mulls Blocking Binance Over Alleged Manipulation of Forex Rate
- Sources have said that the FG will block the cryptocurrency exchange, Binance, and other similar platforms
- This occurred after the naira reached its all-time low, climbing above N1,800 in the black market on Tuesday, February 21
- This development also followed a disclaimer issued by the Securities and Exchange Commission about the platform’s operations
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Legit.ng journalist Zainab Iwayemi has over three years of experience covering the Economy, Technology, and Capital Market.
The Nigerian government is contemplating blocking online platforms of Binance and other cryptocurrency companies to prevent alleged manipulation of the foreign exchange market and illicit financial transfers, according to a report.
Source: Getty Images
This came as the naira reached an all-time low of N1,815 to a dollar on the black market due to the recent unprecedented depreciation of the Nigerian currency.
On Tuesday, traders in the black market told Legit.ng that they sold the naira for N1,830 per dollar.
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Earlier signals
The Securities and Exchange Commission (SEC) of Nigeria issued a disclaimer on Binance Nigeria Limited in September 2023, stating that the platform's operations in Nigeria are illegal since it is neither registered nor regulated by the commission.
The company kept operating despite the regulatory body's warning, drawing a lot of business, particularly from urban youth and those thought to be money launderers and speculators.
The platform's operations in the country caused officials to worry about national security in addition to allegations of economic sabotage since criminal groups frequently use the platforms, sometimes in exchange for ransom payments.
Premium Times reported that digital asset platforms are also frequently used to manipulate FX values by creating fictitious transactions that either drive up or down values, according to law enforcement authorities.
The procedure is referred to as a “sophisticated heist against the Nigerian economy” by an EFCC source investigating a criminal complaint against digital asset platforms.
The source, not authorised to speak to the press, explained that manipulators frequently create fake interest to sell dollars, which they subsequently purchase through the buy window at an estimated rate by simultaneously opening the buy and sell windows for a single user.
She said:
“This gives the dollar a fake value against the naira, which then sets a frenzy and mislead the market. This fake price is often quoted by BDCs who raise their prices to meet the Binance benchmark even without any corresponding demand in that segment.”
CBN official speaks
A top official at the Central Bank of Nigeria (CBN) expressed concern about the naira's negative trend versus the dollar during the past ten days, blaming it on speculative websites' artificial devaluation.
He said:
“Through manipulative rent-seeking, Binance’s global reach results in higher USD to NGN exchange rates often being used as a benchmark for currency trading, misleadingly devaluing the Naira in global markets.”
He did, however, add that money launderers and terrorist financiers who have no issues with arbitrage are the ones who promote trade on the platform.
He said:
“We started noticing this sharp trend from February 9, and since then it has caused significant devaluation of the naira against the USD. This is simply criminal.
"Similar charges against Binance for alleged currency manipulation and unethical behaviour have resulted in international sanctions and an ongoing legal dispute in the US.
"The government would follow in the footsteps of nations like Malta, Malaysia, and France if it decided to impose a ban on websites that trade digital assets.
Tinubu's special adviser speaks
Bayo Onuaga, special adviser on information and strategy to President Tinubu, in a post via his X page, alleged that Binance is blatantly setting exchange rate for Nigeria and hijacking CBN's role.
It cited that the cryptocurrency trading platform suffers access limitations from multiple jurisdictions, such as the US, Singapore, Canada, and the UK.
He said:
“Binance, facing regulatory showdown in many countries and causing disruptions in the currency market, should not be allowed to dictate the value of the Naira, not on its crypto exchange platform. Other crypto platforms, such as Kucoin and Bybit, should be banned from operating in our cyberspace. FX platform Aboki should be re-banned.
“The EFCC and the CBN should move against these platforms trying to manipulate our national currency to Ground Zero. Crypto should be banned in our country, or else this bleeding of our currency will continue unabated.”
ABCON blames Binance for naira fall
Legit.ng reported that the Nigerian currency, the naira, performed poorly at the Peer-2-Peer (P2P) window and in the black foreign exchange markets.
According to data obtained by Legit.ng, the naira on the P2P platform, mainly utilised by cryptocurrency traders, was exchanged at a rate of N903 to a dollar on Tuesday, August 8, 2023.
This signifies a loss in value of N6 or 0.66%, compared to Monday's exchange rate of N897 to a dollar.
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Source: Legit.ng
