INTRODUCTION.
On the 28th of February 2024, the Nigerian fiat to stablecoin market; P2P(Peer to Peer) was reportedly banned for Nigerian users. A few days earlier there were reports from the Nigerian Government on the state of the P2P market on Binance contributing to the free fall of the Nigerian Naira (NGN) against the US Dollar (USD). Just In a moment, we will find out more about the current state of emergency for the affected users as NIGERIA FG CRACK DOWN ON CRYPTO P2P.
The backbeat: ₦aira free fall.
On the 14th of June 2023, the Nigerian Naira fell by 23% in a single day. It traded for ₦600 to $1. It continued its descent and even fell lower to a record low of ₦853 to $1
Let’s go back a bit in time to February 2023. A time when the Central Bank of Nigeria(CBN), the sole issuer of legal tender for the entire Federal Republic of Nigeria engineered a major crash crunch in the country. This was due to the Nigerian government in collaboration with the CBN attempting a forced currency note changeover. Delivering too few of the new notes into circulation in an attempt to force her citizens into using the newly designed currency note by the CBN. Of course, this did not sit well with the citizens of Nigeria as it led to massive outbursts of street protests.
Fast forward to 2024, the CBN allows both new and old currency to remain as legal tenders to ease the cash crunch which has left the citizens in a state of unrest. But then there arose the issue of the naira which has kept falling and showed no sign of strength against the dollar.
THE IMPACT OF THE NAIRA(₦) FALL ON THE NIGERIAN ECONOMY.
As a result of the repeated drop in the NGN, inflation was the obvious consequence. The inflation of daily living and expenses increased by more than 30% in a very short period.
It was more on the economy because Nigeria is more of an importing nation than it is an exporting nation. So the dependency on the dollar is very high, as those who deal with the FX would need dollars to import goods into the country or to close deals on their businesses. It became so bad the prices of food were affected the most due to the largely consumed food products in Nigeria being imported. Many took to the streets to protest as required and it got the attention of the Nigerian government this time. So they launched an investigation into this matter and traced the pressure on the naira(₦) to those who offer dollars to buyers of the dollars within the country.
THE INVESTIGATION THAT LED TO THE NIGERIA CENTRAL BANK CRACKING DOWN ON CRYPTO P2P ON BINANCE.
The Nigerian government in a bid to tackle inflation in the country had placed the task on its central bank to discover the root cause of the naira(₦) free fall.
The central bank did not take long to identify the root cause in their own opinion to be:
- Bureau de change(BDC)
- Binance P2P.
The BDC is just another sector that was created by law to issue dollars to Nigerian citizens at the parallel market rate or so-called black market.
Note: that Nigerian citizens are mostly not able to get dollars from their banks, so that was what led to the creation of BDC.
Binance P2P on the other hand was a real shock to everyone, especially those of us in the crypto space. Because the currency rate of a nation should have nothing to do with a crypto exchange. To a large extent that it would even cause it to crumble.
Well unfortunately the CBN governor came on live television to publicly lay strong allegations that Binance is one of the major factors contributing to the fall of the nation’s currency. He further stated that in the last year, Binance had processed $26B for unidentified Nigerians. An amount that has left most of us dumb folded. All Binance users go through KYC . Whether or not this is true, we are yet to be sure, because Binance as an organization has not addressed these new accusations officially.
The target: BINANCE OR CRYPTO
From the look of things, it seems the Nigerian government might be after banning one of these two. But in the past, 2021 to be precise, the Nigerian government placed a ban on cryptocurrency in the country. That was recently removed by the current administration. It all gets confusing now that we have another issue of a ban on some crypto websites again with Binance being the most affected. As we speak, the P2P page on the Binance app for NGN has stopped displaying for Nigerian users. The same goes with some other exchanges like Quidax and a couple more. ALL their sites are inaccessible.
A news report by the Financial Times allegedly stated that security operatives from Nigeria had cracked down and detained two Binance executives, including an American and a British-Pakistani, following an invitation for a meeting with officials from the Office of the National Security Adviser (NSA).
Two high ranking officials of the exchange, who recently arrived in the country were arrested. They were detained and their passports seized.
WHAT IS THE STAND OF BINANCE?
At the beginning of this situation here’s what Binance Africa had to say
Don’t believe the FUD. We would like to assure users that their funds are secure and our peer-to-peer (P2P) product remains operational. Binance provides a P2P marketplace, not as a price discovery platform. To be clear: it is market-driven and is not intended to be a proxy for currency pricing in Nigeria.
Well, it speaks for itself. A crypto exchange should not be the go-to for Nigerian citizens or currency swap officials to decide on currency pricing.
What’s next?
Well, what’s next is that we await further investigation and hear what else Binance has got to say now that they have removed Nigerians and the NGN from the P2P marketplace.
Conclusion.
This very situation has led to so great controversy. Analysts are saying this could lead to diversion of investors from Nigeria.
The main caveat now is this; will the Nigerian government stop on Binance or will it ban all Exchanges that offer P2P to Nigerians? I leave you with that thought and see you on the next one.
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