The Nigerian government has initiated a crackdown on access to prominent cryptocurrency exchanges to curb currency speculation and stabilize its faltering currency.
However, this development comes as the Nigerian naira continues to hit record lows against the dollar, prompting authorities to block consumer access to leading crypto platforms such as Binance, Coinbase, and Kraken. The Nigerian Communications Commission (NCC), the country’s telecom regulator, directed telecom companies to enforce these restrictions, leading to intermittent consumer access to some cryptocurrency sites as of late Wednesday.
Government’s shifting stance on cryptocurrencies
This latest action marks a dramatic turnaround in Nigeria’s approach to cryptocurrencies. Under President Bola Tinubu’s administration, cryptocurrencies were once viewed as a key component of Nigeria’s market-friendly reforms to attract foreign investment and revitalize the struggling economy. These reforms included efforts to regulate digital assets and reverse a previous ban on crypto transactions intended to enhance standards against money laundering and terrorism financing.
However, the government’s focus has now turned towards addressing the complexities of its multi-rate exchange system and ending the longstanding currency peg, which has seen the naira devalue significantly in recent months.
Cryptocurrency exchanges have played a pivotal role in establishing unofficial market prices for the naira, with platforms like Binance often used by local traders for currency exchanges, notably involving the stablecoin tether.
Economic and regulatory implications
The decision to restrict access to crypto websites is seen as a measure to mitigate the impact of currency speculation on the naira’s value. The Nigerian government is currently undertaking efforts to streamline its exchange rate system and abandon its currency peg, a long-standing issue. The value of the naira has been devalued twice in the past eight months, with the currency hitting 1,600 to the dollar on Wednesday, as reported by LSEG data. This marks a significant decrease from its value at the beginning of January, which was less than 900.
It is important to know that special adviser to President Tinubu, Bayo Onanuga, accused Binance of undermining the Central Bank of Nigeria’s role in setting currency rates, suggesting a potential ban on cryptocurrencies to protect the national currency. Despite these challenges, Binance—in an email to its Nigerian users–– has assured that their funds remain secure, although the NCC has yet to comment.
Nigeria’s engagement with cryptocurrency has been notable, with the country ranking second to India regarding the proportion of private wealth held in digital assets, according to Chainalysis. The popularity of cryptocurrencies among younger Nigerians reflects a growing distrust in the naira as a reliable store of value, compounded by recent market crashes involving digital currencies.
Reactions from Nigerians
Nigerians haven’t welcomed the new regulations. Many have started complaining about the new reforms on X (formerly Twitter). Checks by Cryptopolitan using the MTN network have also confirmed this.
A Nigerian X user tweeted that Binance wasn’t the problem, nor the Naira rates; instead, “there are deep systematic problems that haven’t been addressed that every economist alive has been pointing to for the past 8 years.”
Another Nigerian on X stated:
The current restrictions on cryptocurrency platforms underscore the government’s determination to control the foreign exchange market and stabilize the national economy.
Whether these restrictions will curb the Naira’s instability is yet to be seen, but let’s keep our fingers crossed and see how things unfold.
