Nigeria: Binance dictates fate of crypto market 

By Temitayo Lawal, in Lagos
Posted on Tuesday, 27 December 2022 09:00

Representations of cryptocurrencies are seen in front of displayed Binance logo in this illustration taken November 10, 2022. REUTERS/Dado Ruvic/Illustration

High volatility in global crypto markets has hit Nigeria hard; but Binance executives tell The Africa Report they reject the idea of a coming bust. 

In November this year, FTX, the world’s third largest cryptocurrency exchange by volume, collapsed. It obliterated billions of dollars of crypto assets across the world. The exchange was nominally worth over $32bn.

Crypto currencies have provided a lifeline in Nigeria, where the currency loses nearly 10% of its value annually according to the IMF, and where exchange controls immiserate the lives of Nigerians who need to move money in or out.

The FTX collapse reverberated across Nigeria’s crypto market, with individual and institutional traders losing money. Nigerian crypto startup Nestcoin, for instance, lost $4m and has had to lay off staff.  

It comes as the global crypto ecosystem goes through profound upheaval. Bitcoin, the most expensive cryptocurrency, had dipped from its 2021 high of $69,000 to its current value at around $16,000.  

Binance or bust?

Attention now shifts in the Nigerian market to Binance, the world’s biggest crypto exchange by volume. Being the dominant crypto platform, many fear that a Binance bust would decimate the Nigerian crypto market and erode the value of investments.  

The platform is already feeling the heat of the recent crypto crisis and resultant trust deficit occasioned by the collapse of FTX.  

A recent report commissioned by Binance claims that while they are relatively solid, its bitcoin liabilities were bigger than assets by $245m and about half of its reserves, worth $75bn, was held in BUSD, its own stablecoin and BNB, its native token coin.  

They seem strong but you never can tell. A Binance collapse – God forbid! – is going to shake up the Nigerian market.

All these have fuelled mass withdrawals from its platform, with investors taking out $3bn in a single day and eventually bringing down its digital assets by over 20% to $54.7bn from $69.5bn over a month ago. 

“They seem strong but you never can tell. A Binance collapse – God forbid! – is going to shake up the Nigerian market. It will reverse the progress made by many years. That will further slow down crypto adoption considering the pushback from the regulators,” a Lagos-based finance professional tells The Africa Report, requesting anonymity. 

Widespread adoption of crypto 

Many young Nigerians are involved in crypto trading. Widespread adoption is largely due to high trans-continental transaction costs of traditional banking sources, volatility of the Naira and surging inflation, which is currently over 20%.  

Nigeria was ranked 6th on grassroots adoption of crypto in 2021 despite a ban by the Central Bank, and it remains the “most curious country” about crypto since the market crash earlier this year. 

But Akanni Abdulrahman, a Nigerian crypto trader, believes that Binance has strong buffers against the headwinds and should come out of the crisis fine. In an unlikely event that it busts however, he says that the crypto market will bounce back “even if it takes a few years”. 

“Although it was in the early stages and adoption wasn’t widespread, Mt. Gox’s collapse as a major crypto exchange didn’t end crypto, so a Binance bust wouldn’t. We’re in an innovative space and people will keep coming up with new ideas,” he says.  

Worst days behind claims Binance 

Binance West Africa marketing head, Emmanuel Ebanehita tells The Africa Report that the worst days are behind them.  

“We understand the fallout from the FTX implosion has brought with it a lot of extra scrutiny but be rest assured that Binance is in a very strong financial position,” he says. 

Ebanehita also rejects the idea of a possible bust, saying that their capital structure is debt free and the fact that they passed a stress test in recent weeks should reassure the Nigerian crypto community that their funds are secure.  

“People deposit and withdraw assets every day for a variety of different reasons. User assets at Binance are all backed 1:1 and Binance’s capital structure is debt free”, says Ebanehita.  

“We maintain hot wallet balances to ensure that we always have more than enough funds to fulfil withdrawal requests, and we top up hot wallet balances accordingly”, he says. 

Challenging outlook 

In an email to staff, Binance CEO CZ said that while he expects the coming months to be challenging, he is certain that the crypto powerhouse would come out stronger.  

It remains to be seen if his comments are enough to assure Nigerian crypto traders who do not have the luxury to lose invested money.  

A recent report by the country’s statistics bureau revealed that roughly two thirds of Nigerians – over 130 million people – are ‘multidimensionally poor’. Some 42.5% or over 12.7 million young people, among whom crypto is popular, are also unemployed. 


Holders of crypto have already taken a beating from the general dip. Bitcoin, the world’s largest cryptocurrency, has already dipped by 65% this year. The second largest, Ether (ETH) has dropped by 5.5% in the last quarter of this year alone and is down 68% throughout 2022, according to CoinDesk analysis.  

Traders shouldn’t put all their eggs in one basket by diversifying their portfolio across exchanges…

Ebanehita adds that Binance realises that the market needs more than assurances and has therefore chosen to be transparent and proactive, with six commitments, including “never use native tokens as collateral” and “share live proof of assets”. 

On the trader’s side, Akanni advises that measures can also be taken to mitigate risks. “Traders shouldn’t put all their eggs in one basket by diversifying their portfolio across exchanges; those who can do more research and adopt a self-custody approach by opening a wallet of their choice in order to gain more control; and people should only invest what they could lose and not over-leverage,” he says. 

Big is beautiful?

Analysts at CoinDesk have predicted that crypto use, which are by design meant to be decentralised, are likely to be increasingly regulated across the world as governments begin to protect their people and businesses from the digital asset’s high volatility.  

They also predict that many people are likely to switch to bigger and stronger platforms like Binance and Coinbase because users may be less likely to trust smaller players that can easily go under. 

Greater crypto adoption will support innovations and economic competitiveness in the long term and we are committed to more education in this space in order to encourage adoption.

In Africa, Ebanehita argues that there will be more crypto adoption in 2023.  

“We have already seen this tested with over 600,000 Africans educated and partnerships across the continent”, he says. “Greater crypto adoption will support innovations and economic competitiveness in the long term and we are committed to more education in this space in order to encourage adoption,” he says. 

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