The issue between the Federal Government of Nigeria and a crypto currency exchange platform, Binance, will not negatively impact Nigeria’s economy and will not scare away foreign investors from the country, information and communication technology (ICT) and financial experts have said. Rather, the experts said the issue would boost investors’ confidence in the country and technology hubs would continue to spring up because of research and development costs.
Two key officials from Binance had been detained by the government since last week over $26billion that flowed through the crypto currency exchange company’s branch in Nigeria over the past year from “unidentified sources.”
The two executives had rushed to Nigeria following the country’s decision to ban multiple bitcoin trading websites last week, but were detained and their passports seized.
The federal government had blocked the online platforms of Binance and other crypto firms to avert what it considers continuous manipulation of the forex market and illicit movement of funds.
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Apart from Binance, the federal government said other platforms, such as Forextime, OctaFX, Crypto, FXTM, Coinbase, and Kraken, among others, were also blocked.
The governor of the Central Bank of Nigeria, Olayemi Cardoso, early this week, expressed worry over the significant volume of transactions passing through Binance Nigeria, emphasizing that the origin and beneficiaries of these funds are yet to be adequately identified.
“We are concerned that certain practices go on that indicate illicit flows going through a number of these entities and suspicious flows at best.
“In the case of Binance, in the last one year alone, $26billion has passed through Binance Nigeria from sources and users, who we cannot adequately identify,” he said.
Premium Times reported that the Office of the National Security Adviser (ONSA), on Thursday confirmed that the crypto exchange platform, Binance, was being investigated by the Nigerian authorities.
Similarly, yesterday the federal government slammed Binance with a $10billion fine over allegations of influencing the country’s forex crisis.
Onanuga disclosed this Friday morning in an interview with the BBC. According to him, Binance profited substantially from its “illegal transactions” in Nigeria while the country suffered huge losses.
The former News Agency of Nigeria managing director further said the Binance team was already cooperating with the Nigerian government by providing useful information, and had already suspended naira-related transactions on the platform.
“The platform fixes the exchange rate in Nigeria, which is illegal. The Central Bank of Nigeria is the only authority that can fix the exchange rate for Nigeria.
“Binance harbours a lot of people who fix exchange rates, which impacted the country badly at a time the government is trying to stabilise the economy,” he said.
Onanuga added that Binance influenced the increase in foreign exchange rates through currency speculations, which made the value of the naira to fall by almost 70 per cent in recent months.
Binance, with over 170million users globally, has disabled its peer-to-peer feature for Nigerian users. The feature, known as the P2P market, allows buyers and sellers to trade crypto currencies without any third-party intervention.
The Nigerian government had, in 2021 outlawed the country’s crypto currency industry, and since then, the P2P market gained popularity among Nigerians as an alternative way to engage in trade and set an informal value for the naira.
Analysts said Nigeria had one of the youngest demographics in the world, with 43 per cent of its current population under the age of 15, and one of the fastest growing populations in Africa with a current population of 224million.
According to a report from Chainalysis, Nigeria continues to have the highest crypto currency usage in Africa and is among the most developed globally, with a 9 per cent annual growth rate. This places Nigeria in third place out of only six countries that have seen consistent growth since 2021.
However, the crypto currency companies have also been used as conduit to launder money and an avenue for currency speculators to carry out illegal operations.
This is why the federal government believes that a major factor in naira’s decline is the “criminal activities” taking place on the platforms.
Reports said the government had got a court warrant to hold the Binance officials for a minimum of 12 days, and demanded that they submit information on any transaction made on the Binance platform using the naira during the last seven years.
It further demanded that some other Nigeria-related data be removed from the Binance site.
At a press conference, one of President Bola Tinubu’s spokespersons, Bayo Onanuga, said Binance was “blatantly” determining the exchange rate and taking over CBN’s position as the entity that sets currency rates.
In its first official confirmation of the clampdown efforts on the activities of Binance and other crypto platforms, a top official of the ONSA said the security adviser’s office was coordinating an interagency investigation into the operations of Binance, Premium Times reported.
“I am confirming that the Office of the National Security Adviser as part of ongoing operations in the foreign exchange market with the CBN and other law enforcement and security agencies is coordinating an interagency investigation into the operations of Binance,” Zakari Mijinyawa, the head of Strategic Communication at the Office of the National Security Adviser, told Premium Times.
But an Abuja-based information technology expert, Chief Martin Nwoga, told Daily Trust Saturday that due to economic and financial hardship, a great number of Nigerian population participated in crypto schemes, hoping to make astronomic profits.
Nwoga said although the Nigeria Security and Exchange Commission (SEC) had since September 2023 stated that Binance Nigeria Limited was neither a registered company nor regulated in Nigeria, yet Nigerians besieged it.
Asked if the Binance issue would not affect investors’ confidence in Nigeria, the IT expert said, “There are many ICT companies in Nigeria, both local and multinational with great solutions in banking, public sector, devices, mobiles, telco, oil and gas, hospitality, health and agriculture, etc.
“This Binance debacle will not negatively impact them. Investors will continue to create technology hubs in Nigeria because of lower research and development costs.
“I don’t think this particular crackdown will trouble investors. I am sure they will welcome fiscal discipline. In fact, they are negatively impacted by forex distortions. A lot of annual reports of multinationals at the SEC are showing a negative shareholder ROI due to these forex distortions,” he said.
He urged the Nigerian government to intensify its regulations of bitcoin operations by the banks.
“I suggest that financial regulatory agencies in Nigeria should be more proactive in early detection of unregulated entities in the technology sector in Nigeria, especially in the financial markets. There should be increased investment by these agencies in public network scanning technologies to ferret out these illegal FinTech companies and scammers before too many Nigerians and corporations are negatively financially impacted. Implementing Financial Crime Risk Management and Financial Screening will go some way to mitigation,” he said.
A Lagos-based financial expert, Ade Labulo, said Nigeria’s economy would have a positive impact of the Binance probe.
According to Labulo, if the government could successfully curtail the shady deals by some of the bitcoin firms and other online firms, the naira would be stable and the economy will feel its positive impact.
In September 2023, the SEC placed a disclaimer on Binance Nigeria Limited, saying the platform was “neither registered nor regulated by the commission, and its operations in Nigeria were therefore illegal.”
But in its reaction last week, Binance said “users behaving in a manipulative way” will be removed from its platform.
“As industry leaders, we are working hand-in-hand with local authorities, lawmakers and regulators to ensure that we act on non-compliance,” the platform added, noting that it is “setting an upper limit for ads, filtering and removing bad ads, requiring and raising deposits for merchants posting ads, as well as processes for action against any market manipulator.”
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