A Bay of Plenty farmer who set a car alight in a protest in central Wellington this afternoon has been arrested and charged with arson.

The 40-year-old man set his car on fire in Wellington's Cuba mall at about 1.30pm.

He will appear in court on Monday and police have indicated bail will be opposed.

Detective Sergeant Michael Priston said his actions 'clearly endangered' members of the public who were walking in the area.

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"Police are taking the behaviour of this man very seriously and the charge reflects his dangerous actions."

Police also confirmed they had dealt with the same man earlier this week.

Police have spoken to sixteen witnesses, but have asked anybody who saw the incident or made visual recordings to contact them.

The man said in a video posted on Facebook that he was an ex-employee of the chairman of the Rural Bank of New Zealand.

"I've learnt a lot of stuff since then, and I've had enough. I'm gonna make this car disappear," he said.

He claimed that "fractional reserve lending is the root of all our problems" before walking to the boot of the car, which was filled with rubbish, with what appeared to be a lighter.

Watch a graphic video of the explosion here.

There were shrieks from by-standers as he was thrown backwards from the force of the explosion that followed.

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He then threw flaming material back into the boot of the car before closing it.

He announced to shocked witnesses that the car was full of petrol and asked them not to put it out.

"I'm just waiting for police to turn up, I've made my statement."

Plum cafe owner David Fenwick said he heard a loud bang about 1.50pm and ran out of his cafe to see what was going on.

"Suddenly we heard an explosion, so I ran out the front and saw a red station wagon, and there was a fire behind it. I thought it was a street performance gone wrong."

Mr Fenwick ran inside to grab a fire extinguisher, and with a neighbour shop employee, put out the pile of burning rubbish.

"Unfortunately it took hold pretty fast....and the fuel tank exploded. And then it was just noxious smoke and a burning car in the mall on a lovely sunny day."

The fuel tank explosion took part of the body work off, and the car was now a charred wreck with blown-out windows, he said.

The man had spraypainted the message "what is fractional reserve banking...Google it" next to the car, he said.

The protestor hung around after the fire, said Mr Fenwick.

"He was having altercations with passers-by and tried to defend his stance and his actions...He couldn't really hold an arguement as such, but kept mentioning "here's my stand, here's my stand". He wasn't too eloquent in his arguement or his reasoning," he said.

The "overexcited" man kept mentioning YouTube during his comments, he said.

Amidst comments from the crowd of "what an idiot" and "what a dickhead", the protestor assured the crowd he would be gone once the police arrived, said Mr Fenwick.

The police then showed up at the scene and took the protestor away, he said.

People took to Twitter during and after the explosion, posting pictures and videos of the scalded car and smoke clouds.

Mr Fenwick said the car and surrounding broken glass had been cordoned off, and passerbys were stopping to take photos of the charred wreck.