Nigeria's attempt to shift blame onto crypto for its currency challenges may be a convenient tactic, but a deeper examination reveals a more complex reality.

Last week, Nigeria’s telecom regulator, the Nigerian Communications Commission (NCC), ordered telecom companies to restrict access to some of the world’s largest crypto exchanges operating in Nigeria. The websites of companies like Binance, Coinbase, and Kraken were affected.

The move was premised on the idea that crypto exchanges were partly responsible for the continued fall in the value of the naira, which traded as low as NGN 2000 per dollar on some crypto exchanges last week.

“You’re an economic hitman…working with crypto sites to destroy our country,” is how Bayo Onanuga, special adviser on information and strategy to President Tinubu, replied an X user who posted about using VPNs to circumvent the implicit ban.

The government believes that crypto exchanges like Binance enabled a P2P trading market that was determining the value of the naira outside the CBN’s controls, and banning them could bolster efforts to shore up the naira.

This thinking, experts believe, is flawed.

Can the government really ban crypto?

In the recap piece I wrote from my experience at the Africa Tech Summit, I described crypto’s spotlight in Africa’s tech scene as part of the continent's survival strategy. Crypto adoption down here is not merely because Africans are trying to have a taste of a globally relevant technology. It’s driven by core, nearly desperate needs: preserving wealth, trading beyond local borders, and making a fortune. These are needs the Nigerian government have failed to meet as the country grapples with a devaluing currency and impossible global payment channels. So, how could Nigerians flock away from what is essentially a source of sustenance?

Crypto is fundamentally designed to be out of any government’s control, and none of the exchanges that power them are registered yet in Nigeria, meaning there’s little authorities can demand from them. The worst the government can do is what they have done already: asking the Nigeria-licensed internet operators to restrict access to exchanges. But how many of these exchanges can they track? There are over 20 global exchanges that Nigerians use daily, according to a NODO survey. Binance and Coinbase are just some of the popular ones. Moreover, Nigerians, who for seven months through 2022 were banned from accessing social media app X, are used to masking their IPs with VPNs, making a practical crypto clampdown nearly impossible.

Nigeria’s execution of its crypto exchange clampdown may be its toughest hurdle anyway. Despite NCC’s last week orders, thousands of Nigerians can still access the sites widely reported as blocked. More than 20 users from different crypto exchanges—including the recently restricted ones—confirmed to NODO that they continued trading activities as usual on the app on the morning of February 27th, six days after the NCC’s action. Interestingly, these users have done nothing to circumvent the restrictions. “It just works, even the P2P market, everything’s normal—and my VPN is not active yet,” one user said.

Nigeria’s FX troubles are not crypto-driven

Nigeria has a huge forex problem that is hampering its economy and driving inflation to record levels. The Central Bank of Nigeria (CBN) estimates its forex backlog at $5 billion, a slump in global oil prices continues to shrink national revenues, and ravaging banditry has restricted the country’s ability to produce enough agricultural exports.

Despite these troubles, Nigeria largely remains import-dependent, placing a huge demand on the already scarce dollar. Add this to the growing demand for the dollar as a means of wealth preservation, and we get an economy that’s both dollar-dependent and dollar-lacking, a perfect recipe for the local currency plunge.

There are also reports of the government’s role in the naira’s free fall. A recent investigation from local publication BusinessDay highlighted how national revenues distributed to state governors were allegedly used to purchase dollars sourced from the parallel market, leading to further drops in the national currency’s value.

Until last week, the CBN allowed a foreign exchange system that allowed Bureau De Change (BDC) operators to obtain USD at bank rates and sell them at so-called “black market rates”, benefitting from an arbitrage system that titled the supply of the dollar away from official means. This effectively created a system where the naira fall allowed connected Nigerians to create wealth.

None of these problems have anything to do with crypto. Yet, it is crypto that takes the fall.

Crypto players are ready to ball

“There’s no benefit for us when the naira dips,” Gbadebo, a pseudonymous employee at Binance Nigeria said on a call with NODO. Gbadebo explained that Binance watches price movements from NAFEX and BDC operators to set limits for trading naira on its platform. “We’re always watching to ensure merchants don’t manipulate our system to exploit the naira. We also restrict merchants trying to manipulate the system.”

Binance, like most restricted exchanges, is centralised and pro-government in its structure. It’ll be relatively easy for the Nigerian government to work with exchanges to establish policies that protect the naira as much as they favour the adoption of crypto. But somehow, this didn’t happen. An implicit ban is what the industry gets, nine months into an administration that swore to boost local crypto and blockchain adoption.

Despite the government’s clampdown, local crypto founders are still trying to align with the federal government on practical next steps. “A coalition of exchange founders in Nigeria are plotting a move that will weaken the association of crypto with the naira,” an anonymous industry stakeholder said to NODO. “They will announce that news today; hopefully, it works in our favour.”