Nigeria’s President Bola Tinubu’s special adviser, Bayo Onanuga, recently criticized Binance for allegedly setting exchange rates in the country. Onanuga accused the platform of meddling with the Central Bank of Nigeria’s (CBN) role in determining currency values. This accusation has sparked a debate around the role of cryptocurrency exchanges in Nigeria’s financial ecosystem.
In response to the backlash, Binance acknowledged the issue of “temporary suppression of prices” on its peer-to-peer (P2P) platform for Nigerian users. The platform swiftly addressed the problem and resumed trading activities. However, many users expressed their frustrations over the difficulty of trading stablecoins like USDT on Binance, especially as Nigeria’s fiat currency experienced record lows against the US dollar.
Amidst the challenges faced by Binance users, alternative platforms such as KuCoin and ByBit have seen an uptick in trading activities. Former Paxful CEO Ray Youssef even promoted his new platform, noOnes, as a viable alternative for traders in Nigeria. This shift towards other P2P platforms reflects the growing uncertainty surrounding Binance’s operations in the country.
Nigerians have increasingly turned to Binance and other cryptocurrency exchanges to hedge against inflation and currency devaluation. The economic challenges faced by the country, particularly related to forex speculation, have prompted the CBN to implement measures aimed at stabilizing the economy. However, these efforts have yielded limited success, with stakeholders pointing to the role of crypto exchanges in exacerbating the situation.
Despite Binance’s assertion that it is not a price discovery platform, the exchange has become a key venue for Nigerian foreign exchange traders to determine market prices. Following the CBN’s ban on financial institutions facilitating crypto trades in 2021, Nigeria emerged as one of the largest P2P markets globally. The lifting of this ban, coupled with stringent regulations, has led to a surge in trading activity, with the USDT/NGN trading pair alone recording trades worth millions in a single day.
The recent controversy surrounding Binance’s operations in Nigeria highlights the complex relationship between cryptocurrency exchanges and the country’s economy. While these platforms offer a means of accessing digital assets and protecting against economic uncertainties, they also pose challenges in terms of regulatory oversight and exchange rate stability. Moving forward, it will be crucial for policymakers, regulators, and industry stakeholders to engage in constructive dialogue to address these issues and foster a more transparent and sustainable cryptocurrency ecosystem in Nigeria.