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Colonial era

The Banda Islands became the scene of the earliest European ventures in Asia, to get a grip on the spice trade. In August 1511, Afonso de Albuquerque conquered Malacca, which at the time was the hub of Asian trade, on behalf of the king of Portugal. In November of the same year, after having secured Malacca and learning of Banda's location, Albuquerque sent an expedition of three ships led by his friend António de Abreu to find it. Malay pilots guided them via Java, the Lesser Sundas, and Ambon to the Banda Islands, arriving in early 1512. The first Europeans to reach the Banda Islands, the expedition remained for about a month, buying and filling their ships with Banda's nutmeg and mace, and with cloves in which Banda had a thriving entrepôt trade. An early account of Banda is in Suma Oriental, a book written by the Portuguese apothecary Tomé Pires, based in Malacca from 1512 to 1515. Full control of this trade by the Portuguese was not possible, and they remained participants without a foothold in the islands.

In order to obtain a monopoly on the production and trade of nutmeg, the Dutch East India Company (VOC) waged a bloody battle with the Bandanese in 1621. Historian Willard Hanna estimated that before this struggle the islands were populated by approximately 15,000 people, and only 1,000 were left (the Bandanese were killed, starved while fleeing, exiled, or sold as slaves). The Company constructed a comprehensive nutmeg plantation system on the islands during the 17th century.

As a result of the Dutch interregnum during the Napoleonic Wars, the British invaded and temporarily took control of the Banda Islands from the Dutch and transplanted nutmeg trees, complete with soil, to Sri Lanka, Penang, Bencoolen, and Singapore. From these locations they were transplanted to their other colonial holdings elsewhere, notably Zanzibar and Grenada. The national flag of Grenada, adopted in 1974, shows a stylised split-open nutmeg fruit. The Dutch retained control of the Spice Islands until World War II.

Connecticut may have received its nickname ("the Nutmeg State", " Nutmegger ") from the claim that some unscrupulous Connecticut traders would whittle "nutmeg" out of wood, creating a "wooden nutmeg", a term which later came to mean any type of fraud. This narrative may have to do with the issue that one has to grate to obtain the spice powder, not crack a nutmeg, and this may not have been widely known by some purchasers of the product.