How Traders Use Binance to Manipulate Exchange Rate of Naira

It is not too late for this government to admit that their floating gamble has failed and then wake up to take charge before things get worse than this.

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How Traders Use Binance to Manipulate Exchange Rate of NairaBy Chukwudi Iwuchukwu

This time last year the dollar rate was stable @ 730 to $1. It was the same at Binance P2P. USDT was stable and pegged at 730 to $1.

So what changed between last year and this year that caused a 60% Naira depreciation?
There are two answers.

1. President Tinubu’s miscalculation.

2. Greedy Speculators

Lets explore these two factors.

Last June, this present government made a brilliant and audacious move. They were bold enough to unify the official FX rate and the parallel market by floating the naira.

 

A very bold thing to do, and also the right thing to do too, but they failed with this attempt because no country in the world floats its currency without a backup Plan for volatility.

Naira free fall worrisome, embarrassing, says expert

Thus when the speculators who are in business to make money saw the flaw in what the Government’s Plan, they leveraged on that to strike. That is why, from June till now the Naira has been on a free fall with no fundamental or excessive demand to back it’s depreciation.

EXPLANATION
The same people who bought the dollar last year are the ones who are still buying it this year.

This time last year, NNPC did not remit dollars to CBN, and Still not remitting to date.
Nigeria was not invaded by aliens demanding dollars to justify this depreciation of our currency.

The CBN’s situation hasn’t worsened since December, rather it has improved.
The dollar supply hasn’t worsened since December, rather it has improved.

Capital importation hasn’t worsened since December, rather it has improved.
In just two weeks, Nigeria attracted over $1.8 billion in inflow from capital importation. Bearing in mind that last year, we had supply issues as banks were not selling dollars, which you could only get from the black market, but still, the naira was a stable.

This Researcher urgently needed $10,000 last year. He bought from his dollar plug, Adamu, who sold to him at 730 as Zenith Bank did not have a dollar to sell.

The same Zenith Bank does not have dollar to sell as of today but dollar has magically gone haywire since that time.

Which leads to the second leg of this Piece.

Binance speculators…

Prior to 2020, the P2P market on Binance was not mainstream.
Every Tom, Dick, and Harry could buy USDT at Binance at the official rate using their naira card.

The official rate was the country’s exchange rate, which was what Binance was selling its USDT at at the time.

Then Emefiele struck in February 2020 by banning Crypto.

The P2P market went underground and became mainstream, and the channel where you go to buy your USDT.

The P2P market was largely insignificant prior to that attention because it was a small market in the forex ecosystem until last June.

In 2020, the country witnessed the largest conversion of young Nigerians into Crypto because we had a bull run that year.

Many people were demanding USDT at a level we have not seen to date.
In all these demands in 2020, the naira rate was stable @ 450 to $1.

It is quite strange and ironical that when there is no demand for USDT, the dollar rate at Binance is going up every hour for no reason and no fundamental reason to back this increment.

South Africa has a bigger P2P market on Binance than Nigeria.

South Africa has a daily volume of $30–50 million, but the South African currency, the rand, is stable and does not depreciate the way the Naira has been doing since last year.
Nigeria has a daily turnover of just $1 million on Binance P2P.

It was the same volume last year.

Instead of stability since there is no excessive demand for USDT, what we have seen is price manipulation by large traders in that segment who trade large amounts of dollars.
Yesterday, on Binance all day, witnessed a mind-blowing discovery.

These guys on P2P wake up to start manipulating the naira price with no backing demand.

The price went from 1700 to 1850 in less than 3 hours.

A thorough check, showed no excessive demand for USDT from the buyers to warrant this depreciation. Rather, what was noticed were 4-5 traders on Binance playing a game among themselves, moving funds around, and then deliberately driving up price.
Just like that.

As they were doing their price manipulation on Binance, the unofficial market, which is the BDC sellers on the street, were monitoring what they were doing to fix their own rate. When they were done with this manipulation, they withdraw their gain for the day and went God knows where to enjoy their profit for the day.

The USDT/Naira pair on Binance is the official black market rate where all dealers pick their pricing model from.

Both the media, FX speculators, influencers, and traders resort to Binance rates.
This Researcher bought $5,000 from his plug Adamu. Before he gave the price, he checked Binance for the rate and then gave him his best price.

This speculative practice is not sustainable.

It is hurting the larger economy and the greater population of our citizens who are hurting from the madness going on in Binance.

It is more hurtful because the true value of the naira is not 1,900, it isn’t even 1,500. The fair value is between 650 and 800 to $1.

EXPLANATION
The fair value of a country’s currency is calculated by two models.
1.The total export of the previous year.
2. The total amount of money in circulation

Nigeria exported goods worth $70 billion last year.

The total money in circulation was 3.2 trillion naira as of December last year.
When you juxtapose these two, it gives you a sense of where our currency should be, which is between 650-800 but today, we are buying the dollar at 1,900 to $1 because of the slow market realisation of this government.

The Way Forward
It is not too late for this government to admit that their floating gamble has failed and then wake up to take charge before things get worse than this.

PROCEDURE
1) Admit they failed in floating the naira without a backup in case of volatility.
2) Introduce a managed float by pegging the exchange rate of the currency to a price, within the range of 650–800, and then do all they can to defend it. This will run the speculators out of town.
3) Right now there’s no coordination between Wale Edun, the Minister of Finance responsible for the fiscal side, and Cardoso, the CBN Governor, driving the monetary policies.
This needs to change quickly.

These speculators on Binance are making a fortune speculating on our currency, Speculation of anything is actually a lucrative business.

George Soros once made $1 billion in a day, speculating, betting against the British pounds in 1992.

Thus speculating on Binance is giving these guys insane money that trading Crypto won’t give them, and this is why they won’t stop anytime soon.

They won’t stop till they drive the price of the dollar to 3,000 to $1. Will the Government wait to be crippled by them?

We expect to see Wale Edun and Cardoso to halt these mad people before they (the Speculators in Binance), who are in minority, push our economy to Lebanon and Venezuela because of their Greed.

This is where they are heading. Are we going to allow Binance speculations destroy us?
The ball is in the court of the Government to act quickly.