Nigeria is amending regulations to allow crypto trading

Nigeria is changing its crypto rules, as the government wants digital asset transactions taxed and regulated. The Securities and Exchange Commission (SEC) confirmed on Tuesday that it is working on new rules to bring all eligible transactions into the formal tax net.

A bill outlining a tax framework for crypto is currently with lawmakers and is expected to pass this quarter. “The SEC acknowledges the substantial amount of tax revenue that will accrue from cryptocurrency transactions,” the regulator reportedly said on Tuesday.

Nigeria’s crypto scene is massive. Nigerians, especially the youth, use crypto as a hedge against runaway inflation and a collapsing naira. Since mid-2023, the naira has lost about 70% of its value against the dollar. People have turned to Bitcoin and stablecoins to protect their money.

President Bola Tinubu, in office since 2023, has been aggressively pushing fiscal reforms to boost government revenue and cut the budget deficit. Lawmakers approved a ₦54.99 trillion ($36.4 billion) spending plan for 2025 in December. 

“We anticipate gradual traction toward centralized exchanges because they will provide greater protections and comfort for investors,” the SEC said.

Nigeria’s first crypto licenses are coming

The Nigerian SEC regulator will soon issue its first licenses for digital service providers and tokenized assets. Director-General Emomotimi Agama said:

“Being a crypto enthusiast and fintech enthusiast, I can tell you without doubt that this is going to happen sooner than you think. We must support the youths of this country to be able to achieve the benefit that is accruable in fintech. The market size is huge, and it is growing.”

The decision aligns Nigeria with other jurisdictions, such as the European Union, South Africa, and Botswana, which have all moved to regulate crypto after the 2022 market crash wiped out billions and led to major bankruptcies.

But Nigeria’s approach has been different. For years, the government was openly hostile to crypto. In 2021, authorities banned banks from accepting crypto transactions as officials accused traders of manipulating the naira’s exchange rate.

In February 2024, the government blocked access to Binance and arrested two of its executives. One of them, Tigran Gambaryan, was in Abuja’s Kuje correctional center for nearly a year, facing charges of tax evasion, currency speculation, and money laundering.

At the time, Agama said:

“The thing that needs to be done is delisting the naira from the P2P space in order to avoid the level of manipulation that is currently happening. Recent concerns regarding crypto P2P traders and their perceived impact on the exchange rate of the naira has proven the need for collective action.”

The Central Bank of Nigeria (CBN) is also taking action. Governor Olayemi Cardoso says Binance allowed illicit transactions in naira, which is why the platform was shut down.

“SEC will not hesitate to utilize all the powers within its mandate to handle issues that are negative and pose a threat to national interest,” Agama said. “We ask that those involved in sharp practices that undermine national interest should cease and desist.”

The government blames crypto for the naira’s 65% collapse since it relaxed currency controls in June to attract foreign investors. According to Chainalysis, the country saw $56.7 billion in crypto transactions in June 2024, up 9% from 2023.

Nigeria, meanwhile, looks set to regain the mantle of Africa’s biggest economy (it currently ranks fourth) when the national statistics agency releases rebased figures next month. Gross domestic product is expected to be revised upward to almost $500 billion.

The release of overhauled inflation data on Tuesday was another boon. The measure fell to 24.5% from almost 35% a month before.

That could offer the central bank scope to trim its key interest rate when it meets on Thursday, giving consumer spending and the economy another lift.

The good news hasn’t come a moment too soon for President Bola Tinubu, whose attempts to steady the government’s finances have sent food and fuel prices soaring, and exacerbated hardship in a country where more than half the population lives below the poverty line.

Challenges remain to keep up the momentum, but the long-flailing economy does have a far better look.

Cryptopolitan Academy: Are You Making These Web3 Resume Mistakes? - Find Out Here