Nigeria, one of Africa’s largest economies and a partner country of the BRICS, finds itself in a challenging position with its new BRICS partnership and its geopolitical alliance with the United States. The first warning sign is the conflicting views between the two alliances on cryptocurrency regulation and the dominance of the US dollar.
Bringing Binance to Nigeria, together with the United States
On October 23, 2024, the US Embassy and Consulates in Nigeria issued a statement announcing that the two countries had reached a bilateral agreement to combat network crimes involving illicit funds and cryptocurrencies. Both the US and Nigeria hold firm positions on cryptocurrency regulation, driven by concerns over money laundering, terrorist financing, and other illegal activities.
This stance led to the arrest and trial of CZ, the founder and former CEO of Binance, by US authorities. In the trial, CZ was found to have insufficient anti-money laundering controls in place for the cryptocurrency exchange.
Nigeria’s relationship with cryptocurrencies is complex. According to a report by Nigeria Chainalysis, the country ranks second in global cryptocurrency adoption. Demand for stablecoins ranks high in cryptocurrency acceptance as a substitute for scarce US dollars. From June 2023 to June 2024, cryptocurrency revenues exceeded $59 billion, which could be a potential avenue for the country to increase much-needed foreign exchange to aid its economic situation. However, due to its confrontational approach to cryptocurrencies, it continues to lose out on much of this potential.
Initially, the government of President Bola Ahmed Tinubu seemed more relaxed about cryptocurrencies. However, this did not last long as it quickly shifted towards stricter regulations, blaming the rapid devaluation of the Naira on cryptocurrencies and cryptocurrency exchanges.
Crackdown on Binance
Binance, the cryptocurrency exchange, faced the most severe repercussions from the crackdown. The Nigerian government imposed a fine of $10 billion on Binance for money laundering, tax evasion, and manipulation of the local currency.
Subsequently, two executives of Binance, Nadeem Anjarwalla and US citizen Tigran Gambaryan, were detained by authorities. Following that, internet service providers (ISPs) were ordered to block all cryptocurrency exchanges, making it difficult for citizens to access these platforms.
The Nigerian people have devised several workarounds to these restrictions, such as peer-to-peer (P2P) trading and VPNs. This resilience reflects a trend seen in other countries where cryptocurrency usage persists despite strict regulations.
Despite the government crackdown on cryptocurrencies, the inflation rate continues to soar. The International Monetary Fund (IMF) reports low economic growth, financing challenges, and increasing living costs in the country. It urges Nigeria to implement reforms and better fiscal policies to promote economic resilience and diversification.
After the release of Secretary of State Gambaryan, Secretary of State Antony Blinken thanked the Nigerian government in a statement, reaffirming the close relationship between the two governments in law enforcement matters.
Nigeria’s Alliance with the BRICS
Nigeria’s alliance with the BRICS and its geopolitical relationship with the United States may be a balancing act in the end. One of the BRICS’ agendas is the de-dollarization of the global economy and improving trade opportunities for partner countries. However, the de-dollarization of the global economy contradicts US interests.
Nigeria’s partnership with the BRICS will demonstrate its support for economic diversification and the agenda of breaking free from Western financial dominance. This raises the question of how the country plans to navigate seemingly conflicting alliances.
The BRICS alliance openly supports cryptocurrencies. It plans to establish a blockchain-based payment system to facilitate international trade, likely utilizing existing infrastructure, most likely Bitcoin. It also encourages member countries to adopt cryptocurrencies in international trade.
As a key member of the BRICS, Russia has already turned to cryptocurrencies for international transactions after most of its foreign exchange reserves were frozen due to sanctions. Iran is another recent example of a country learning to cope with similar sanctions and limitations.
Aligning with the BRICS’ goals may mean Nigeria will relax the restrictions on cryptocurrencies and other digital assets supported by the US. The IMF also hopes that Nigeria will permit cryptocurrency exchanges and implement strict anti-money laundering and counter-terrorism financing (AML/CFT) policies to help improve the country’s economic stability. The IMF’s call for strict AML and CFT policies implies US influence.
Currently, the bilateral agreement between the US and Nigeria demonstrates a common ground in combating cryptocurrency-related cybercrimes. However, aligning with the BRICS, promoting de-dollarization, and adopting cryptocurrency-friendly policies will inevitably create tension between the two countries.
Nigeria needs to clarify its position; otherwise, it risks jeopardizing its own economic stability and foreign investments if subjected to sanctions similar to other members of the BRICS group.
