Nigeria’s Crackdown on Crypto Continues

The Nigerian government is relentlessly targeting the entire crypto industry in a desperate effort to stabilize its fiat currency, the debasement of which they attribute to alternative financial instruments.

Nigeria’s Economic and Financial Crimes Commission recently blocked 1,146 accounts associated with an ongoing investigation into offenses of unauthorized forex trading, money laundering, and terrorism financing. To put it simply, all accounts that trade in cryptocurrency are a target. The EFCC chairman stated that the local currency, the naira, would have crashed in a week if the accounts hadn’t been blocked.

Several local FinTech companies, OPay, Kuda Bank, Moniepoint, and PalmPay, were reportedly ordered by the Central Bank of Nigeria to stop onboarding new customers while going through the audit of the Know Your Customer (KYC) process, apparently due to the same investigation.

“The Central Bank of Nigeria feels like a lot of crypto traders were leveraging the fintech platforms to disrupt the FX market,” – reportedly said a person familiar with the matter.

The ongoing government intervention heated up two months ago. In February, the Nigerian government cracked down on crypto exchanges, accusing them of facilitating debasement of the naira. First, the government tried to block the exchanges’ websites and then it filed tax evasion and money laundering charges against the largest player, Binance. A federal court also ordered Binance to provide the EFCC with comprehensive data on all Nigerian persons trading on its platform.

Two Binance executives traveled to Nigeria in February to address the claims that the exchange manipulated the naira. However, they were quickly arrested at the airport, even though Binance had already announced its cessation of all naira transactions.

One of them, Nadeem Anjarwalla, managed to escape custody in March using his Kenyan passport. Reportedly, local police have already arrested him and are now completing the paperwork to send him back to Nigeria. Tigran Gambaryan, the second arrested Binance employee, has been in custody since February.

Nigeria has struggled with crypto regulation, issuing murky guidelines or u-turning on orders over real fears for its fiat currency. Back in 2021, the Central Bank of Nigeria (CBN) banned all regulated financial institutions from offering services to crypto exchanges. The central bank then removed restrictions on cryptocurrency transactions at the end of 2023.

Things got worse in April when the CBN allegedly issued an order requiring all financial institutions to put individuals or entities engaged in transactions with crypto exchanges on ‘Post No Debit’ instruction (ban on withdrawals and payments) for six months. At first, the central bank denied the existence of the document, then ‘un-denied’ it. So, the directive really does exist, aligning with the authority’s current efforts to catch anyone trading USDT or any other substitute for the devaluating naira. 

Despite the heavy scrutiny from authorities, there is little light at the end of the tunnel. On April 25, the president appointed a new chair for the Nigeria Security Exchange Commission. Emomotimi Agama’s pro-crypto background might bring positive changes to the sector, according to locals. Maybe we will see some clarity for crypto investors and streamline the process of licensing the exchanges that are expected to take place this year.