The naira, Nigeria’s official currency, has been on a downward spiral for years, and its recent crash has led to widespread frustration among Nigerians. Rather than taking responsibility for the economic woes, the government has opted to blame external factors, including cryptocurrency exchange Binance. In this article, we will examine the root causes of the naira’s collapse and explore why embracing competition and accountability is essential for the country’s economic recovery.
A History of Currency Mismanagement
The naira’s value has been eroding steadily over the years, with its inflation rate reaching a 28-year high in March 2024 (Bloomberg). This trend is not a recent development; rather, it is a culmination of years of poor monetary policy and lack of transparency. The government has consistently failed to provide a stable store of value for Nigerians, leading to widespread distrust in the currency.
The Nigerian Government’s Response
In February 2024, tensions escalated when Bayo Onanuga, President Bola Tinubu’s adviser on information and strategy, accused Nigerians of being unpatriotic for trading naira for cryptocurrency. He suggested that crypto should be banned in the country to prevent further erosion of the currency (Onanuga). This statement reflects the government’s misguided approach to addressing economic issues.
Binance: A Convenient Scapegoat?
The Nigerian government then accused Binance of moving $26 billion out of the country illegally, and invited the exchange to send employees to discuss the matter. In response, Binance sent two staff members, Tigran Gambaryan and Nadeem Anjarwalla, who were subsequently placed under house arrest (Binance). The government has charged them with tax evasion, money laundering, and providing financial services without a license.
A Pattern of Repression
The treatment of Binance’s employees is just the latest in a long series of actions taken by the Nigerian government to restrict access to cryptocurrency. The government has:
- Created a central bank digital currency (CBDC) despite its failure to gain traction
- Caused a cash shortage, leading to increased use of electronic payments
- Banned and unbanned cryptocurrency multiple times
- Blocked access to exchanges
This behavior is all too common among governments worldwide. Rather than providing a stable economy, they often opt for restrictive policies that trap citizens with money they wouldn’t otherwise use.
Currency Competition: A Much-Needed Discipline
As Nobel laureate F.A. Hayek explained in 1976, one of the key purposes of currency competition is to impose discipline on existing monetary and financial agencies (Hayek). By introducing alternative currencies, governments can force themselves to provide a reliable store of value.
The Rise of Cryptocurrency Use in Nigeria
Nigeria has expressed more interest in cryptocurrency than any other African country in 2023, according to a CoinGecko study. This trend is not surprising, given the government’s failure to provide a stable economy (CoinGecko).
The International Consequences of Government Actions
The Nigerian government’s actions have significant implications for international businesses and investors. The lack of investment will again result in Nigerian citizens suffering the costs of the government’s mistakes.
A Call for Accountability and Competition
The Nigerian government needs to take responsibility for its actions and acknowledge that cryptocurrency use is a symptom, not a cause, of the naira’s failure. By embracing competition and accountability, the government can create an environment where every citizen wants to use the currency.
Conclusion
The naira’s collapse is a symptom of years of currency mismanagement by the Nigerian government. Rather than blaming external factors, it’s time for the government to take responsibility and welcome currency competition. The country can either continue down the path of economic stagnation or work towards creating a stable economy that every citizen will want to use.
References
- Bloomberg: "Nigeria’s Inflation Rate Hits 28-Year High"
- Onanuga, Bayo: "Crypto Should Be Banned in Nigeria"
- Binance: "Binance Responds to Nigerian Government’s Accusations"
- CoinGecko: "Nigeria Expresses Most Interest in Cryptocurrency Among African Countries"
