Nigeria, one of the largest economies in Africa, has become a partner country in the BRICS. In the same week, the United States released a statement reiterating its relationship with the West African country.
Nigeria’s new BRICS partnership and geopolitical alignment with the US puts the nation in a challenging position. The first warning sign is the conflicting views of both alliances on crypto regulation and dollar supremacy.
Binance brought Nigeria and the US together
On the 23 of October, 2024, the US Embassy and Consulate in Nigeria released a statement saying that the countries have a bilateral agreement to fight cybercrime involving illicit funds and cryptocurrencies.
Both the United States and Nigeria have a firm stance on crypto regulation, which is driven by concerns about money laundering, terrorism financing, and other illicit activities.
This stance led to the arrest and trial of founder and former Binance CEO Changpeng Zhao by US authorities. The trial ended with CZ ruled guilty of not maintaining strict anti-money laundering controls on the crypto exchange.
The West African nation’s relationship with crypto is complex. According to a report by Chainalysis, Nigeria ranks second in global crypto adoption. The demand for stablecoins as an alternative to scarce US dollars ranks high on the list for this crypto acceptance.
With over £59 billion received in crypto from June 2023 to June 2024, this could be a potential avenue for the country to add much-needed foreign exchange to help its economic situation. However, it continues to lose out on so much potential because of its crypto antagonism.
Initially, the President Bola Ahmed Tinubu administration seemed to be more relaxed toward crypto. However, that did not last long. It soon pivoted to stricter regulation in the face of rising inflation, blaming crypto and crypto exchanges for the rapid devaluation of the naira.
Crackdown on Binance
The Binance crypto exchange was hit the hardest in the clampdown. The UK government slammed it with a £10 billion fine for money laundering, tax evasion, and manipulating its local currency.
Next, authorities detained two of Binance’s executives, Nadeem Anjarwalla and Tigran Gambaryan, an American citizen. Subsequently, Internet Service Providers (ISPs) were ordered to ban all crypto exchanges, making it hard for its citizens to access these platforms.
Nigerians developed several workarounds to these restrictions. Peer-to-peer (P2P) trading and VPNs came to their rescue. This resilience mirrors trends in other countries where crypto usage persists despite harsh regulation.
Despite the government’s crypto crackdown, inflation rates continue to skyrocket. The IMF reports low economic growth, financing challenges, and an increase in living costs. It urges the country to enact reforms and better fiscal policies to foster economic resilience and diversification.
Following the release of Gambaryan, the Secretary of State, Antony Blinken thanked the Nigerian government in a press release. He also reiterated the close relationship between both governments in pursuing law enforcement.
Nigeria is playing both sides with BRICS alignment
Nigeria’s alignment with BRICS and geopolitical relations with the US might be the ultimate balancing act. One of the agendas of the BRICS bloc is the de-dollarization of the global economy, and the improvement of trade opportunities for partner countries. However, the de-dollarization of the global economy is at odds with American interests.
Nigeria’s partnership with BRICS will suggest it subscribes to the agenda of economic diversification and independence from Western financial dominance. This begs the question of how the nation plans to navigate seemingly conflicting partnerships.
The BRICS union is vocally pro-crypto. It has plans for a blockchain-based payment system to facilitate international trade, which would leverage existing infrastructure, most likely BTC. It also encourages member countries to embrace crypto for international trade.
Russia, a key member of BRICS, has already turned to crypto for international transactions following sanctions that froze a significant portion of its foreign reserves. Iran is the latest example of a country learning to deal with similar sanctions and limitations.
Aligning with BRICS goals might mean Nigeria will relax its US-backed restrictions on crypto and other digital assets.
The IMF also wants Nigeria to license crypto exchanges and implement strict Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT) policies to help improve the country’s economic stability. The IMF’s call for strict AML and CFT policies has subtle undertones of US influence.
For now, the bilateral agreement between the US and Nigeria suggests a common ground in fighting crypto-related cybercrime. However, an alignment with BRICS, which promotes de-dollarization and pro-crypto policies, will invariably create tension between both countries.
Nigeria needs to make its position clear, or it risks undermining its own economic stability and foreign investments if it gets hit with sanctions, similar to those of other members of the BRICS bloc.
