Earlier in January 2021, the Central Bank of Nigeria had released a circular warning banks about dealing with cryptocurrencies. As awareness about crypto began increasing in Nigeria, remittance through the ‘Almighty’ Central bank of Nigeria from overseas began dropping, especially the United States of America dollar. Furthermore, BDC’s began seeing a drop in patronage from buyers as peer-to-peer (P2P) trading of fiat and crypto meant that banks, the CBN and BDCs could be avoided in transatlantic transactions.
The biggest Cryptocurrency exchange in the world, Binance sprang up, thereby offering Nigerians the opportunity to bypass the CBN and BDC in sourcing for forex to meet their various needs. At a time, Naira was always among the top 3 traded currencies on Binance which saw Hundreds of millions of dollars in transactions being conducted weekly in Nigeria without CBN or BDC.
During this period, young and literate Nigerians began investing in crypto, p2p trading and online brokerage. Banks, the CBN and BDC became useless and handicapped despite that CBN was trying to ban remittance of forex into the country with naira as final deposit. This meant that Diasporas who usually utilised the international money transfer organisations (IMTOs) like Worldremit, Western Union, RadiantLife, MoneyFex, Transferwise and a host of others would no longer deposit naira in Nigeria.
All deposits were to be in dollars because adopting dollar remittance was a way to reduce pressure on scare forex in the country and flood the market with dollars — thus allowing importers and commercial banks access forex from alternative sources yet Binance came into the picture because the inability for CBN to float the naira meant that Binance and some other cryptocurrency exchanges with large p2p trades volumes continued to be the defacto choice for most people to change Usdt to NGN.
Consequently, most diasporas would likely remit or buy NGN with Usdt on binance p2p and this act kills Naira faster. Besides, peer to peer transactions on binance are off-chain and so there’s no record of it on the blockchain and it not traceable. Some big peer to peer vendors also speculate on the weakness of naira by supplying more naira for any available Usdt on binance P2P.
Article by: Habeeb Araba