Nigeria Goes After Crypto Exchanges, Binance Execs Reportedly Detained

Update: It has now been reported that the Nigerian government has fined Binance $10 billion, accusing the exchange of profiting from illegal transactions. The government has also confirmed that it made two arrests, without providing the identities of the detainees.

Nigeria’s Department of State Security reportedly detained two Binance senior executives - citizens of the United States and the United Kingdom - on Monday night at Abuja airport and confiscated their passports. Neither Binance nor the Nigerian authorities have provided confirmation at the time of writing. However, the exchange has halted peer-to-peer trading of the naira against BTC and USDT.

Two weeks ago, the Nigerian government released statistics showing that the inflation rate in January rose to 29.9%, its highest level since 1996. Nigeria’s currency, the naira, dropped significantly at the beginning of February and since then has been trading at around 1,550 to $1 compared to 900 at the start of the year. 

Crypto exchanges have become an alternative for trading the local fiat currency, establishing a ‘black-market’ price for the naira, as Nigerians use cryptocurrencies to curb its constant devaluation. The president's leading advisor, Bayo Onanuga, even accused Binance of "blatantly setting exchange rate for Nigeria, hijacking CBN role." On February 21, the authorities ordered local telecom companies to put an [easy-to-bypass and non-legally binding] ban on access to cryptocurrency exchanges, including Binance, Coinbase, Kraken, OctaFX and others. 

Some Nigerian users have reported that, following these accusations, the platform imposed a cap on the exchange rate traders can use when converting naira to USDT, preventing the users from selling their assets for above 1802 naira per U.S. dollar. 

Following this move, the governor of the Central Bank of Nigeria (CBN) said on February 27 at a press conference that local authorities, including an anti-corruption agency, police and national security adviser, are currently investigating cryptocurrency exchanges. While talking about funds flowing through crypto exchanges, he specifically mentioned Binance:

“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, $26 billion has passed through Binance Nigeria from sources and users who we cannot adequately identify.”

In 2021, the CBN banned all regulated financial institutions from offering services to crypto exchanges. The central bank then removed restrictions on cryptocurrency transactions and issued guidelines for VASPs last December, recognising that the increasing demand and worldwide crypto adoption had made the limits unreasonable.

Last year, the CBN intensified efforts to push the adoption of eNaira, Nigeria's CBDC, on a nationwide scale, rather than giving up on its digitization agenda. However, these latest government moves show that it is desperately trying to fix its economy instead of prioritising its long-term goal to digitize it. There is no guarantee that these actions against the crypto industry will stabilise the situation. Nevertheless, it is clear that these decisions could damage the international image of the Bola Tinubu government and reduce the support of the population, which has lost access to assets and can no longer protect against increasing inflation.