On February 21, Binance caused a stir in the Nigerian cryptocurrency scene by capping the USDT P2P exchange rate as a means of complying with regulatory requirements.

The exchange promptly overturned this judgement in response to strong criticism, enabling business as usual.

Although this step was taken with the purpose of reducing tensions, it's possible that Binance's circumstances were unintentionally made worse.

This happened when the government took action to shut down cryptocurrency platforms. It singled out the Binance website along with a few other FX trading platforms, claiming that they were linked to inflationary pressures in Nigeria.

On February 22, a number of Nigerian Binance users reported having trouble logging onto the exchange's application, raising worries.

that part of its attempts to stabilise the rapidly declining currency of the nation, the Nigerian government had been ordering telecommunications service providers to ban access to all cryptocurrency exchange sites at the same time that these complaints surfaced.

Binance assured users through emails that although there were difficulties on its platform, its app continued to function normally, allaying their fears.

The exchange underlined the safety of users' money and reaffirmed its dedication to continuing communication with regional regulatory bodies.

But when demands surfaced for Binance to be completely banned in Nigeria, things got even worse. Most recently, Binance CEO Richard Teng has been the subject of interrogations by Nigeria's House of Representatives Committee on Financial Crimes about allegations of money laundering and terrorism financing.

Prior to that, Bayo Onanuga, a presidential assistant, attacked the business for its part in determining Nigeria's currency rates, comparing it to usurping the Central Bank's jurisdiction.

In an effort to stop further Naira manipulation, he urged the Nigerian Economic and Financial Crimes Commission (EFCC) to prosecute Binance as well as other exchanges like KuCoin and Bybit.

Local cryptocurrency platforms in Nigeria also claimed to have been impacted by the limitations imposed by the government. The government's decision to outlaw cryptocurrency exchanges was sharply criticised by the Nigerian cryptocurrency community, who saw it as just another authoritarian reaction to the nation's problems.

The Nigerian government, however, has not wavered in its resolve to prohibit Binance P2P trading, indicating a more extensive crackdown on cryptocurrency trading operations in Nigeria.

Stakeholders are worried about the move's possible detrimental effects on the nation's financial inclusion, investment, and innovation. There is a widespread concern that the excessive regulation by the government might force cryptocurrency trading underground, so denying Nigerians access to digital assets and impeding technical progress in the financial industry.

It is noteworthy that prior to removing limitations in December 2023, the Nigerian government outlawed cryptocurrency in February 2021.

Could cryptocurrency hurt the naira?

The severe anti-cryptocurrency position taken by the Nigerian government is not new.

The Central Bank of Nigeria (CBN) issued a regulation in February 2021 that forbade banks and other financial institutions from acting as middlemen in cryptocurrency transactions. The CBN justified the prohibition by pointing to worries about money laundering, financing of terrorism, and other illegal activity.

Nigeria has continued to be a hub for bitcoin adoption and trading despite the ban since the majority of these merchants use VPNs. The nation's tech-savvy millennials have flocked in droves to cryptocurrency platforms, lured by the promise of digital currencies and disillusioned with traditional financial institutions.