Binance Removes Naira from P2P Trading Platform
Binance exchange is once again grappling with regulatory challenges in various jurisdictions. The exchange platform recently removed Naira from P2P platform for consumers in Nigeria. The decision arrived at a time when the Nigerian government alleged that the exchange contributed to the devaluation of Naira. On this account, the Nigerian government is seeking to impose a $10 billion penalty on the Binance exchange.
Bayon Onahuga, Nigerian President Bola Tinubu’s advisor talked to journalists at BBC on 1st March. During the interview, Onahuga stated that the financial compensation demand on Binance is part of the government’s efforts to stabilize the local economy. The presidential advisor further stated that Binance may inflict harm to the Nigerian economy since it may allegedly fix forex rates.
It is important to note that P2P features on Binance allow Nigerian cryptocurrency investors to purchase or sell without third-party support. The p2p trading feature gained popularity in 2021 after the Nigerian government imposed a ban on the local crypto sector during the reign of former President Muhammadu Buhari. It is worth mentioning that Naira has faced devaluation in the COVID aftermath.
Binance to Face Scrutiny from Nigerian Government
In addition to insurmountable fiat devaluation, Nigeria is also embattled with 3-decade high inflation rate of 29.9%. As one of the various preventive measures, Nigerian officials have focused their attention on cryptocurrency platforms. The digital asset trading platforms have amassed massive traffic, generated sizeable trading activity, and established the informal value of Naira.
The cryptocurrency community in Nigeria reported obstacles in accessing established trading platforms such as Binance and OctaFX etc. Binance set a selling limit on Tether token on p2p platforms in Nigeria following this incident. Henceforth, Nigerian investors were unable to sell more than 1,802 naira in USDT. Binance officials in Nigeria later reported that the limitation was caused by an automated system pause.
Meanwhile, the Central Bank of Nigeria (CBN) has expressed concerns about questionable transactions on Binance for last year. Olayemi Cardoso, CBN governor noted that the trading platform processed around $26 billion in 2023 that was linked back to unidentified users and sources.
Nigerian SEC has claimed that Binance Nigeria Limited was not a regulated entity in the region on September, 2023.
Nigerian Government and Crypto Regulations
Nigeria is not the only country facing economic setbacks. Turkey, another nation dealing with the same constraints, has taken a friendly stance on crypto. President Tayyip Erdogan appointed crypto expert Professor Fatima Ozkul, as a member of the Central bank board in December.
The nation also introduced a comprehensive regulatory framework for crypto to address licensing and taxation issues.
This streamlined approach has facilitated crypto investors in the region. At the same time, this approach encouraged foreign investments in the form of crypto trading platforms by ensuring compliance with FATF requirements.
On the other hand, the Nigerian government is simply imposing bans on trading platforms to stabilize Naira value. Notably, The All Progressive Congress Party (APC) has been the leading administrative force in the region since the election of Muhammad Buhari as president in 2015. The current President Bola Tinubu also hails from APC.
Naira Devaluation
A look into the historical value of Naira against USD indicates that the Naira (NGN) has been subjected to long-term devaluation. Data projections from Trading Economics indicate a consistent drop in NGN value against USD during the last 10 years.
The Economic Intelligence Unit (EIU) recently issued a statement noting that CBN lacks the liquidity to balance Naira value. EIU analysts have further stated that around $20 billion out of total $33 billion CBN reserves are stuck in various derivative deals that could increase fiat’s volatility.
A Bloomberg article on the subject reveals that Naira devaluation has persisted since 2014 on account of crude oil price decline in international markets. It is important to note that crude oil accounts for more than 90% of total forex earnings. Nigeria is the biggest economy of Africa and the largest oil producer and exporter in the continent.
